Amended in Senate April 1, 2013

Amended in Senate March 21, 2013

Amended in Senate March 7, 2013

California Legislature—2013–14 First Extraordinary Session

Assembly Bill No. 2

Introduced by Assembly Member Pan

January 29, 2013

An act to amend Sections 10119.1, 10198.7, 10603, 10753, 10753.05, 10753.06.5, 10753.11, 10753.12, 10753.14, and 10954 of, to amend the heading of Chapter 9.7 (commencing with Section 10950) of Part 2 of Division 2 of, to amend and add Sections 10113.95 and 10119.2 of, to add Sections 10127.21 and 10960.5 to, to add Chapter 9.9 (commencing with Section 10965) to Part 2 of Division 2 of, and to repeal Section 10902.4 of, the Insurance Code, relating to health care coverage.

LEGISLATIVE COUNSEL’S DIGEST

AB 2, as amended, Pan. Health care coverage.

(1) Existing federal law, the federal Patient Protection and Affordable Care Act (PPACA), enacts various health care coverage market reforms that take effect January 1, 2014. Among other things, PPACA requires each health insurance issuer that offers health insurance coverage in the individual or group market in a state to accept every employer and individual in the state that applies for that coverage and to renew that coverage at the option of the plan sponsor or the individual. PPACA 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 that plan or coverage. PPACA allows the premium rate charged by a health insurance issuer offering small group or individual coverage to vary only by rating area, age, tobacco use, and whether the coverage is for an individual or family and prohibits discrimination against individuals based on health status, as specified. PPACA requires an issuer to consider all enrollees in its individual market plans to be part of a single risk pool and to consider all enrollees in its small group market plans to be part of a single risk pool, as specified. PPACA also 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.

Existing law provides for the regulation of health insurers by the Insurance Commissioner. Existing law requires insurers offering coverage in the individual market to offer coverage for a child subject to specified requirements. 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.

This bill would require an insurer, on and after October 1, 2013, to offer, market, and sell all of the insurer’s health benefit plans that are sold in the individual market for policy years on or after January 1, 2014, to all individuals and dependents in each service area in which the insurer provides or arranges for the provision of health care services, as specified, but would require insurers to limit enrollment in individual health benefit plans to specified open enrollment and special enrollment periods. The bill would prohibit these insurers from imposing any preexisting condition exclusion upon any individual and from conditioning the issuance or offering of individual health benefit plans on any health status-related factor, as specified. The bill would require a health insurer to consider the claims experience of all insureds of its nongrandfathered individual health benefit plans offered in the state to be part of a single risk pool, as specified, would require the insurer to establish a specified index rate for that market, and would authorize the insurer to vary premiums from the index rate based only on specified factors. The bill would authorize insurers to use only age, geographic region, and family size for purposes of establishing rates for individual health benefit plans, as specified. The bill would require insurers to provide specified information regarding the Exchange to applicants for and subscribers of individual health benefit plans offered outside the Exchange. The bill would prohibit an insurer from advertising or marketing an individual grandfathered health plan for the purpose of enrolling a dependent of the policyholder in the plan and would also require insurers to annually issue a specified notice to policyholders enrolled in a grandfathered plan. The bill would make certain of these provisions inoperative if, and 12 months after, certain provisions of PPACA are repealed or amended, as specified.

Existing law requires insurers to guarantee issue their small employer health benefit plans, as specified. With respect to nongrandfathered small employer health benefit plans for plan years on or after January 1, 2014, among other things, existing law provides certain exceptions from the guarantee issue requirement, allows the premium for small employer health benefit plans to vary only by age, geographic region, and family size, as specified, and requires insurers to provide special enrollment periods and coverage effective dates consistent with the individual nongrandfathered market in the state. Existing law provides that these provisions shall be inoperative if specified provisions of PPACA are repealed.

This bill would modify the small employer special enrollment periods and coverage effective dates for purposes of consistency with the individual market reforms described above. The bill would also modify the exceptions from the guarantee issue requirement and the manner in which an insurer determines premium rates for a small employer health benefit plan, as specified. The bill would also require an insurer to consider the claims experience of all enrollees of its nongrandfathered small employer health benefit plans offered in this state to be part of a single risk pool, as specified, would require the insurer to establish a specified index rate for that market, and would authorize the insurer to vary premiums from the index rate based only on specified factors. The bill would make certain of these provisions inoperative, as specified, if, and 12 months after specified provisions of PPACA are repealed.

(2) PPACA requires a state or the United States Secretary of Health and Human Services to implement a risk adjustment program for the 2014 benefit year and every benefit year thereafter, under which a charge is assessed on low actuarial risk plans and a payment is made to high actuarial risk plans, as specified. If a state that elects to operate an American Health Benefit Exchange elects not to administer this risk adjustment program, the secretary will operate the program and issuers will be required to submit data for purposes of the program to the secretary.

This bill would require that any data submitted by health insurers to the secretary for purposes of the risk adjustment program also be submitted to the Department of Insurance, in the same format. The bill would require the department to use that data for specified purposes.

(3) Existing law requires insurers to provide a summary of information about each of their health insurance policies, as provided, upon the appropriate disclosure form as prescribed by the Insurance Commissioner.

This bill would provide that, on and after January 1, 2014, a health insurer issuing the federal uniform summary of benefits and coverage also complies with the commissioner’s disclosure requirements, but would require that the insurer ensure that all applicable state law disclosures are made in other documents. The bill would require the insurer to provide the commissioner a copy of the federal summary of benefits and coverage form and the corresponding health insurance policy, as specified.

(4) This bill would become operative only if SB 2 of the 2013-14 First Extraordinary Session is enacted and becomes effective.

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 10113.95 of the Insurance Code is
amended to read:

10113.95.  

(a) A health insurer that issues, renews, or amends
individual health insurance policies shall be subject to this section.

(b) An insurer subject to this section shall have written policies,
procedures, or underwriting guidelines establishing the criteria
and process whereby the insurer makes its decision to provide or
to deny coverage to individuals applying for coverage and sets the
rate for that coverage. These guidelines, policies, or procedures
shall ensure that the plan rating and underwriting criteria comply
with Sections 10140 and 10291.5 and all other applicable
provisions.

(c) On or before June 1, 2006, and annually thereafter, every
insurer shall file with the commissioner a general description of
the criteria, policies, procedures, or guidelines that the insurer uses
for rating and underwriting decisions related to individual health
insurance policies, which means automatic declinable health
conditions, health conditions that may lead to a coverage decline,
height and weight standards, health history, health care utilization,
lifestyle, or behavior that might result in a decline for coverage or
severely limit the health insurance products for which individuals
applying for coverage would be eligible. An insurer may comply
with this section by submitting to the department underwriting
materials or resource guides provided to agents and brokers,
provided that those materials include the information required to
be submitted by this section.

(d) Commencing January 1, 2011, the commissioner shall post
on the department’s Internet Web site, in a manner accessible and
understandable to consumers, general, noncompany specific
information about rating and underwriting criteria and practices
in the individual market and information about the California Major
Risk Medical Insurance Program (Part 6.5 (commencing with
Section 12700)) and the federal temporary high risk pool
established pursuant to Part 6.6 (commencing with Section
12739.5). The commissioner shall develop the information for the
Internet Web site in consultation with the Department of Managed
Health Care to enhance the consistency of information provided
to consumers. Information about individual health insurance shall
also include the following notification:

“Please examine your options carefully before declining group
coverage or continuation coverage, such as COBRA, that may be
available to you. You should be aware that companies selling
individual health insurance typically require a review of your
medical history that could result in a higher premium or you could
be denied coverage entirely.”

(e) Nothing in this section shall authorize public disclosure of
company-specific rating and underwriting criteria and practices
submitted to the commissioner.

(f) This section shall not apply to a closed block of business, as
defined in Section 10176.10.

(g) (1) This section shall become inoperative on November 1,
2013, or the 91st calendar day following the adjournment of the
2013-14 First Extraordinary Session, whichever date is later.

(2) If Section 5000A of the Internal Revenue Code, as added
by Section 1501 of PPACA, is repealed or amended to no longer
apply to the individual market, as defined in Section 2791 of the
federal Public Health Service Act (42 U.S.C. Sec. 300gg-4), this
section shall become operative 12 months after the date of that
repeal or amendment.

SEC. 2.  

Section 10113.95 is added to the Insurance Code, to
read:

10113.95.  

(a) A health insurer that renews individual
grandfathered health benefit plans shall be subject to this section.

(b) An insurer subject to this section shall have written policies,
procedures, or underwriting guidelines establishing the criteria
and process whereby the insurer makes its decision to provide or
to deny coverage to dependents applying for an individual
grandfathered health benefit plan and sets the rate for that coverage.
These guidelines, policies, or procedures shall ensure that the plan
rating and underwriting criteria comply with Sections 10140 and
10291.5 and all other applicable provisions of state and federal
law.

(c) On or before the June 1 next following the operative date of
this section, and annually thereafter, every insurer shall file with
the commissioner a general description of the criteria, policies,
procedures, or guidelines that the insurer uses for rating and
underwriting decisions related to individual grandfathered health
benefit plans, which means automatic declinable health conditions,
health conditions that may lead to a coverage decline, height and
weight standards, health history, health care utilization, lifestyle,
or behavior that might result in a decline for coverage or severely
limit the health insurance products for which individuals applying
for coverage would be eligible. An insurer may comply with this
section by submitting to the department underwriting materials or
resource guides provided to agents and brokers, provided that those
materials include the information required to be submitted by this
section.

(d) Nothing in this section shall authorize public disclosure of
company-specific rating and underwriting criteria and practices
submitted to the commissioner.

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

(1) “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 pursuant to that law.

(2) “Grandfathered health benefit plan” has the same meaning
as that term is defined in Section 1251 of PPACA.

(f) (1) This section shall become operative on November 1,
2013, or the 91st calendar day following the adjournment of the
2013-14 First Extraordinary Session, whichever date is later.

(2) If Section 5000A of the Internal Revenue Code, as added
by Section 1501 of PPACA, is repealed or amended to no longer
apply to the individual market, as defined in Section 2791 of the
federal Public Health Service Act (42 U.S.C. Sec. 300gg-4), this
section shall become inoperative 12 months after the date of that
repeal or amendment.

SEC. 3.  

Section 10119.1 of the Insurance Code is amended to
read:

10119.1.  

(a) This section shall apply to a health insurer that
covers hospital, medical, or surgical expenses under an individual
health benefit plan, as defined in subdivision (a) of Section
10198.6, that is issued, amended, renewed, or delivered on or after
January 1, 2007.

(b) At least once each year, a health insurer shall permit an
individual who has been covered for at least 18 months under an
individual health benefit plan to transfer, without medical
underwriting, to any other individual health benefit plan offered
by that same health insurer that provides equal or lesser benefits
as determined by the insurer.

“Without medical underwriting” means that the health insurer
shall not decline to offer coverage to, or deny enrollment of, the
individual or impose any preexisting condition exclusion on the
individual who transfers to another individual health benefit plan
pursuant to this section.

(c) The insurer shall establish, for the purposes of subdivision
(b), a ranking of the individual health benefit plans it offers to
individual purchasers and post the ranking on its Internet Web site
or make the ranking available upon request. The insurer shall
update the ranking whenever a new benefit design for individual
purchasers is approved.

(d) The insurer shall notify in writing all insureds of the right
to transfer to another individual health benefit plan pursuant to
this section, at a minimum, when the insurer changes the insured’s
premium rate. Posting this information on the insurer’s Internet
Web site shall not constitute notice for purposes of this subdivision.
The notice shall adequately inform insureds of the transfer rights
provided under this section including information on the process
to obtain details about the individual health benefit plans available
to that insured and advising that the insured may be unable to
return to his or her current individual health benefit plan if the
insured transfers to another individual health benefit plan.

(e) The requirements of this section shall not apply to the
following:

(1) A federally eligible defined individual, as defined in
subdivision (e) of Section 10900, who purchases individual
coverage pursuant to Section 10785.

(2) An individual offered conversion coverage pursuant to
Sections 12672 and 12682.1.

(3) An individual enrolled in the Medi-Cal program pursuant
to Chapter 7 (commencing with Section 14000) of Part 3 of
Division 9 of the Welfare and Institutions Code.

(4) An individual enrolled in the Access for Infants and Mothers
Program, pursuant to Part 6.3 (commencing with Section 12695).

(5) An individual enrolled in the Healthy Families Program
pursuant to Part 6.2 (commencing with Section 12693).

(f) It is the intent of the Legislature that individuals shall have
more choice in their health care coverage when health insurers
guarantee the right of an individual to transfer to another product
based on the insurer’s own ranking system. The Legislature does
not intend for the department to review or verify the insurer’s
ranking for actuarial or other purposes.

(g) (1) This section shall become inoperative on January 1,
2014, or the 91st calendar day following the adjournment of the
2013-14 First Extraordinary Session, whichever date is later.

(2) If Section 5000A of the Internal Revenue Code, as added
by Section 1501 of PPACA, is repealed or amended to no longer
apply to the individual market, as defined in Section 2791 of the
federal Public Health Service Act (42 U.S.C. Sec. 300gg-4), this
section shall become operative 12 months after the date of that
repeal or amendment.

SEC. 4.  

Section 10119.2 of the Insurance Code is amended to
read:

10119.2.  

(a) Every health insurer that offers, issues, or renews
health insurance under an individual health benefit plan, as defined
in subdivision (a) of Section 10198.6, shall offer to any individual,
who was covered under an individual health benefit plan that was
rescinded, a new individual health benefit plan without medical
underwriting that provides equal benefits. A health insurer may
also permit an individual, who was covered under an individual
health benefit plan that was rescinded, to remain covered under
that individual health benefit plan, with a revised premium rate
that reflects the number of persons remaining on the health benefit
plan.

(b) “Without medical underwriting” means that the health insurer
shall not decline to offer coverage to, or deny enrollment of, the
individual or impose any preexisting condition exclusion on the
individual who is issued a new individual health benefit plan or
remains covered under an individual health benefit plan pursuant
to this section.

(c) If a new individual health benefit plan is issued, the insurer
may revise the premium rate to reflect only the number of persons
covered under the new individual health benefit plan.

(d) Notwithstanding subdivisions (a) and (b), if an individual
was subject to a preexisting condition provision or a waiting or
affiliation period under the individual health benefit plan that was
rescinded, the health insurer may apply the same preexisting
condition provision or waiting or affiliation period in the new
individual health benefit plan. The time period in the new
individual health benefit plan for the preexisting condition
provision or waiting or affiliation period shall not be longer than
the one in the individual health benefit plan that was rescinded
and the health insurer shall credit any time that the individual was
covered under the rescinded individual health benefit plan.

(e) The insurer shall notify in writing all insureds of the right
to coverage under an individual health benefit plan pursuant to
this section, at a minimum, when the insurer rescinds the individual
health benefit plan. The notice shall adequately inform insureds
of the right to coverage provided under this section.

(f) The insurer shall provide 60 days for insureds to accept the
offered new individual health benefit plan and this plan shall be
effective as of the effective date of the original individual health
benefit plan and there shall be no lapse in coverage.

(g) This section shall not apply to any individual whose
information in the application for coverage and related
communications led to the rescission.

(h) (1) This section shall become inoperative on January 1,
2014, or the 91st calendar day following the adjournment of the
2013-14 First Extraordinary Session, whichever date is later.

(2) If Section 5000A of the Internal Revenue Code, as added
by Section 1501 of PPACA, is repealed or amended to no longer
apply to the individual market, as defined in Section 2791 of the
federal Public Health Service Act (42 U.S.C. Sec. 300gg-4), this
section shall become operative 12 months after the date of that
repeal or amendment.

SEC. 5.  

Section 10119.2 is added to the Insurance Code, to
read:

10119.2.  

(a) Every health insurer that offers, issues, or renews
health insurance under an individual health benefit plan, as defined
in subdivision (a) of Section 10198.6, shall offer to any individual,
who was covered by the insurer under an individual health benefit
plan that was rescinded, a new individual health benefit plan that
provides the most equivalent benefits.

(b) A health insurer that offers, issues, or renews individual
health benefit plans inside or outside the California Health Benefit
Exchange may also permit an individual, who was covered by the
insurer under an individual health benefit plan that was rescinded,
to remain covered under that individual health benefit plan, with
a revised premium rate that reflects the number of persons
remaining on the health benefit plan consistent with Section
10965.9.

(c) If a new individual health benefit plan is issued under
subdivision (a), the insurer may revise the premium rate to reflect
only the number of persons covered on the new individual health
benefit plan consistent with Section 10965.9.

(d) The insurer shall notify in writing all insureds of the right
to coverage under an individual health benefit plan pursuant to
this section, at a minimum, when the insurer rescinds the individual
health benefit plan. The notice shall adequately inform insureds
of the right to coverage provided under this section.

(e) The insurer shall provide 60 days for insureds to accept the
offered new individual health benefit plan under subdivision (a),
and this plan shall be effective as of the effective date of the
original health benefit plan and there shall be no lapse in coverage.

(f) This section shall not apply to any individual whose
information in the application for coverage and related
communications led to the rescission.

(g) This section shall apply notwithstanding subdivision (a) or
(d) of Section 10965.3.

(h) (1) This section shall become operative on January 1, 2014,
or the 91st calendar day following the adjournment of the 2013-14
First Extraordinary Session, whichever date is later.

(2) If Section 5000A of the Internal Revenue Code, as added
by Section 1501 of PPACA, is repealed or amended to no longer
apply to the individual market, as defined in Section 2791 of the
federal Public Health Service Act (42 U.S.C. Sec. 300gg-4), this
section shall become inoperative 12 months after the date of that
repeal or amendment.

SEC. 6.  

Section 10127.21 is added to the Insurance Code, to
read:

10127.21.  

Any data submitted by a health insurer to the United
States Secretary of Health and Human Services, or his or her
designee, for purposes of the risk adjustment program described
in Section 1343 of the federal Patient Protection and Affordable
Care Act (42 U.S.C. Sec. 18063) shall be concurrently submitted
to the department and in the same format. The department shall
use the information to monitor federal implementation of risk
adjustment in the state and to ensure that insurers are in compliance
with federal requirements related to risk adjustment.

SEC. 7.  

Section 10198.7 of the Insurance Code is amended to
read:

10198.7.  

(a) A health benefit plan for group coverage shall
not impose any preexisting condition provision or waivered
condition provision upon any individual.

(b) (1) A nongrandfathered health benefit plan for individual
coverage shall not impose any preexisting condition provision or
waivered condition provision upon any individual.

(2)  A grandfathered health benefit plan for individual coverage
shall not exclude coverage on the basis of a waivered condition
provision or preexisting condition provision for a period greater
than 12 months following the individual’s effective date of
coverage, nor limit or exclude coverage for a specific insured by
type of illness, treatment, medical condition, or accident, except
for satisfaction of a preexisting condition provision or waivered
condition provision pursuant to this article. Waivered condition
provisions or preexisting condition provisions contained in
individual grandfathered health benefit plans may relate only to
conditions for which medical advice, diagnosis, care, or treatment,
including use of prescription drugs, was recommended or received
from a licensed health practitioner during the 12 months
immediately preceding the effective date of coverage.

(3) If Section 5000A of the Internal Revenue Code, as added
by Section 1501 of PPACA, is repealed or amended to no longer
apply to the individual market, as defined in Section 2791 of the
Public Health Service Act (42 U.S.C. Sec. 300gg-4), paragraph
(1) shall become inoperative 12 months after the date of that repeal
or amendment and thereafter paragraph (2) shall apply also to
nongrandfathered health benefit plans for individual coverage.

(c) (1) A health benefit plan for group coverage may apply a
waiting period of up to 60 days as a condition of employment if
applied equally to all eligible employees and dependents and if
consistent with PPACA. A waiting period shall not be based on a
preexisting condition of an employee or dependent, the health
status of an employee or dependent, or any other factor listed in
Section 10198.9. During the waiting period, the health benefit plan
is not required to provide health care services and no premium
shall be charged to the policyholder or insureds.

(2) A health benefit plan for individual coverage shall not
impose a waiting period.

(d) In determining whether a preexisting condition provision,
a waivered condition provision, or a waiting period applies to a
person, a health benefit plan shall credit the time the person was
covered under creditable coverage, provided that the person
becomes eligible for coverage under the succeeding health benefit
plan within 62 days of termination of prior coverage, exclusive of
any waiting period, and applies for coverage under the succeeding
plan within the applicable enrollment period. A plan shall also
credit any time that an eligible employee must wait before enrolling
in the plan, including any postenrollment or employer-imposed
waiting period.

However, if a person’s employment has ended, the availability
of health coverage offered through employment or sponsored by
an employer has terminated, or an employer’s contribution toward
health coverage has terminated, a carrier shall credit the time the
person was covered under creditable coverage if the person
becomes eligible for health coverage offered through employment
or sponsored by an employer within 180 days, exclusive of any
waiting period, and applies for coverage under the succeeding plan
within the applicable enrollment period.

(e) An individual’s period of creditable coverage shall be
certified pursuant to Section 2704(e) of Title XXVII of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-3(e)).

SEC. 8.  

Section 10603 of the Insurance Code is amended to
read:

10603.  

(a) (1) On or before April 1, 1975, the commissioner
shall promulgate a standard supplemental disclosure form for all
disability insurance policies. Upon the appropriate disclosure form
as prescribed by the commissioner, each insurer shall provide, in
easily understood language and in a uniform, clearly organized
manner, as prescribed and required by the commissioner, the
summary information about each disability insurance policy offered
by the insurer as the commissioner finds is necessary to provide
for full and fair disclosure of the provisions of the policy.

(2) On and after January 1, 2014, a disability insurer offering
health insurance coverage subject to Section 2715 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-15) shall satisfy
the requirements of this section and the implementing regulations
by providing the uniform summary of benefits and coverage
required under Section 2715 of the federal Public Health Service
Act and any rules or regulations issued thereunder. An insurer that
issues the federal uniform summary of benefits referenced in this
paragraph shall ensure that all applicable disclosures required in
this chapter and its implementing regulations are met in other
documents provided to policyholders and insureds. An insurer
subject to this paragraph shall provide the uniform summary of
benefits and coverage to the commissioner together with the
corresponding health insurance policy pursuant to Section 10290.

(b) Nothing in this section shall preclude the disclosure form
from being included with the evidence of coverage or certificate
of coverage or policy.

SEC. 9.  

Section 10753 of the Insurance Code is amended to
read:

10753.  

(a) “Agent or broker” means a person or entity licensed
under Chapter 5 (commencing with Section 1621) of Part 2 of
Division 1.

(b) “Benefit plan design” means a specific health coverage
product issued by a carrier to small employers, to trustees of
associations that include small employers, or to individuals if the
coverage is offered through employment or sponsored by an
employer. It includes services covered and the levels of copayment
and deductibles, and it may include the professional providers who
are to provide those services and the sites where those services are
to be provided. A benefit plan design may also be an integrated
system for the financing and delivery of quality health care services
which has significant incentives for the covered individuals to use
the system.

(c) “Carrier” means a health insurer or any other entity that
writes, issues, or administers health benefit plans that cover the
employees of small employers, regardless of the situs of the
contract or master policyholder.

(d) “Child” means a child described in Section 22775 of the
Government Code and subdivisions (n) to (p), inclusive, of Section
599.500 of Title 2 of the California Code of Regulations.

(e) “Dependent” means the spouse or registered domestic
partner, or child, of an eligible employee, subject to applicable
terms of the health benefit plan covering the employee, and
includes dependents of guaranteed association members if the
association elects to include dependents under its health coverage
at the same time it determines its membership composition pursuant
to subdivision (s).

(f) “Eligible employee” means either of the following:

(1) Any permanent employee who is actively engaged on a
full-time basis in the conduct of the business of the small employer
with a normal workweek of an average of 30 hours per week over
the course of a month, in the small employer’s regular place of
business, who has met any statutorily authorized applicable waiting
period requirements. The term includes sole proprietors or partners
of a partnership, if they are actively engaged on a full-time basis
in the small employer’s business, and they are included as
employees under a health benefit plan of a small employer, but
does not include employees who work on a part-time, temporary,
or substitute basis. It includes any eligible employee, as defined
in this paragraph, who obtains coverage through a guaranteed
association. Employees of employers purchasing through a
guaranteed association shall be deemed to be eligible employees
if they would otherwise meet the definition except for the number
of persons employed by the employer. A permanent employee
who works at least 20 hours but not more than 29 hours is deemed
to be an eligible employee if all four of the following apply:

(A) The employee otherwise meets the definition of an eligible
employee except for the number of hours worked.

(B) The employer offers the employee health coverage under a
health benefit plan.

(C) All similarly situated individuals are offered coverage under
the health benefit plan.

(D) The employee must have worked at least 20 hours per
normal workweek for at least 50 percent of the weeks in the
previous calendar quarter. The insurer may request any necessary
information to document the hours and time period in question,
including, but not limited to, payroll records and employee wage
and tax filings.

(2) Any member of a guaranteed association as defined in
subdivision (s).

(g) “Enrollee” means an eligible employee or dependent who
receives health coverage through the program from a participating
carrier.

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

(i) “Financially impaired” means, for the purposes of this
chapter, a carrier that, on or after the effective date of this chapter,
is not insolvent and is either:

(1) Deemed by the commissioner to be potentially unable to
fulfill its contractual obligations.

(2) Placed under an order of rehabilitation or conservation by
a court of competent jurisdiction.

(j) “Health benefit plan” means a policy of health insurance, as
defined in Section 106, for the covered eligible employees of a
small employer and their dependents. The term does not include
coverage of Medicare services pursuant to contracts with the United
States government, or coverage that provides excepted benefits,
as described in Sections 2722 and 2791 of the federal Public Health
Service Act, subject to Section 10701.

(k) “In force business” means an existing health benefit plan
issued by the carrier to a small employer.

(l) “Late enrollee” means an eligible employee or dependent
who has declined health coverage under a health benefit plan
offered by a small employer at the time of the initial enrollment
period provided under the terms of the health benefit plan
consistent with the periods provided pursuant to Section 10753.05
and who subsequently requests enrollment in a health benefit plan
of that small employer, except where the employee or dependent
qualifies for a special enrollment period provided pursuant to
Section 10753.05. It also means any member of an association that
is a guaranteed association as well as any other person eligible to
purchase through the guaranteed association when that person has
failed to purchase coverage during the initial enrollment period
provided under the terms of the guaranteed association’s health
benefit plan consistent with the periods provided pursuant to
Section 10753.05 and who subsequently requests enrollment in
the plan, except where the employee or dependent qualifies for a
special enrollment period provided pursuant to Section 10753.05.

(m) “New business” means a health benefit plan issued to a
small employer that is not the carrier’s in force business.

(n) “Preexisting condition provision” means a policy provision
that excludes coverage for charges or expenses incurred during a
specified period following the insured’s effective date of coverage,
as to a condition for which medical advice, diagnosis, care, or
treatment was recommended or received during a specified period
immediately preceding the effective date of coverage.

(o) “Creditable coverage” means:

(1) Any individual or group policy, contract, or program, that
is written or administered by a health insurer, health care service
plan, fraternal benefits society, self-insured employer plan, or any
other entity, in this state or elsewhere, and that arranges or provides
medical, hospital, and surgical coverage not designed to supplement
other private or governmental plans. The term includes continuation
or conversion coverage but does not include accident only, credit,
coverage for onsite medical clinics, disability income, Medicare
supplement, long-term care, dental, vision, coverage issued as a
supplement to liability insurance, insurance arising out of a
workers’ compensation or similar law, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.

(2) The federal Medicare Program pursuant to Title XVIII of
the federal Social Security Act (42 U.S.C. Sec. 1395 et seq.).

(3) The Medicaid Program pursuant to Title XIX of the federal
Social Security Act (42 U.S.C. Sec. 1396 et seq.).

(4) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.

(5) 10 U.S.C. Chapter 55 (commencing with Section 1071)
(Civilian Health and Medical Program of the Uniformed Services
(CHAMPUS)).

(6) A medical care program of the Indian Health Service or of
a tribal organization.

(7) A health plan offered under 5 U.S.C. Chapter 89
(commencing with Section 8901) (Federal Employees Health
Benefits Program (FEHBP)).

(8) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)(I) of the federal Public Health
Service Act, as amended by Public Law 104-191, the federal Health
Insurance Portability and Accountability Act of 1996.

(9) A health benefit plan under Section 5(e) of the federal Peace
Corps Act (22 U.S.C. Sec. 2504(e)).

(10) Any other creditable coverage as defined by subdivision
(c) of Section 2704 of Title XXVII of the federal Public Health
Service Act (42 U.S.C. Sec. 300gg-3(c)).

(p) “Rating period” means the period for which premium rates
established by a carrier are in effect and shall be no less than 12
months from the date of issuance or renewal of the health benefit
plan.

(q) (1) “Small employer” means either of the following:

(A) For plan years commencing on or after January 1, 2014,
and on or before December 31, 2015, any person, firm, proprietary
or nonprofit corporation, partnership, public agency, or association
that is actively engaged in business or service, that, on at least 50
percent of its working days during the preceding calendar quarter
or preceding calendar year, employed at least one, but no more
than 50, eligible employees, the majority of whom were employed
within this state, that was not formed primarily for purposes of
buying health benefit plans, and in which a bona fide
employer-employee relationship exists. For plan years commencing
on or after January 1, 2016, any person, firm, proprietary or
nonprofit corporation, partnership, public agency, or association
that is actively engaged in business or service, that, on at least 50
percent of its working days during the preceding calendar quarter
or preceding calendar year, employed at least one, but no more
than 100, eligible employees, the majority of whom were employed
within this state, that was not formed primarily for purposes of
buying health benefit plans, and in which a bona fide
employer-employee relationship exists. In determining whether
to apply the calendar quarter or calendar year test, a carrier shall
use the test that ensures eligibility if only one test would establish
eligibility. In determining the number of eligible employees,
companies that are affiliated companies and that are eligible to file
a combined tax return for purposes of state taxation shall be
considered one employer. Subsequent to the issuance of a health
benefit plan to a small employer pursuant to this chapter, and for
the purpose of determining eligibility, the size of a small employer
shall be determined annually. Except as otherwise specifically
provided in this chapter, provisions of this chapter that apply to a
small employer shall continue to apply until the plan contract
anniversary following the date the employer no longer meets the
requirements of this definition. It includes any small employer as
defined in this subparagraph who purchases coverage through a
guaranteed association, and any employer purchasing coverage
for employees through a guaranteed association. This subparagraph
shall be implemented to the extent consistent with PPACA, except
that the minimum requirement of one employee shall be
implemented only to the extent required by PPACA.

(B) Any guaranteed association, as defined in subdivision (r),
that purchases health coverage for members of the association.

(2) For plan years commencing on or after January 1, 2014, the
definition of an employer, for purposes of determining whether
an employer with one employee shall include sole proprietors,
certain owners of “S” corporations, or other individuals, shall be
consistent with Section 1304 of PPACA.

(r) “Guaranteed association” means 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 employer meeting its
membership criteria which (1) includes one or more small
employers as defined in subparagraph (A) of paragraph (1) of
subdivision (q), (2) does not condition membership directly or
indirectly on the health or claims history of any person, (3) 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, (4) is organized and
maintained in good faith for purposes unrelated to insurance, (5)
has been in active existence on January 1, 1992, and for at least
five years prior to that date, (6) has been offering health insurance
to its members for at least five years prior to January 1, 1992, (7)
has a constitution and bylaws, or other analogous governing
documents that provide for election of the governing board of the
association by its members, (8) offers any benefit plan design that
is purchased to all individual members and employer members in
this state, (9) includes any member choosing to enroll in the benefit
plan design offered to the association provided that the member
has agreed to make the required premium payments, and (10)
covers at least 1,000 persons with the carrier with which it
contracts. The requirement of 1,000 persons may be met if
component chapters of a statewide association contracting
separately with the same carrier cover at least 1,000 persons in the
aggregate.

This subdivision applies regardless of whether a master policy
by an admitted insurer is delivered directly to the association or a
trust formed for or sponsored by an association to administer
benefits for association members.

For purposes of this subdivision, an association formed by a
merger of two or more associations after January 1, 1992, and
otherwise meeting the criteria of this subdivision shall be deemed
to have been in active existence on January 1, 1992, if its
predecessor organizations had been in active existence on January
1, 1992, and for at least five years prior to that date and otherwise
met the criteria of this subdivision.

(s) “Members of a guaranteed association” means any individual
or employer meeting the association’s membership criteria if that
person is a member of the association and chooses to purchase
health coverage through the association. At the association’s
discretion, it may also include employees of association members,
association staff, retired members, retired employees of members,
and surviving spouses and dependents of deceased members.
However, if an association chooses to include those persons as
members of the guaranteed association, the association must so
elect in advance of purchasing coverage from a plan. Health plans
may require an association to adhere to the membership
composition it selects for up to 12 months.

(t) “Grandfathered health plan” has the meaning set forth in
Section 1251 of PPACA.

(u) “Nongrandfathered health benefit plan” means a health
benefit plan that is not a grandfathered health plan.

(v) “Plan year” has the meaning set forth in Section 144.103 of
Title 45 of the Code of Federal Regulations.

(w) “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.

(x) “Waiting period” means a period that is required to pass
with respect to the employee before the employee is eligible to be
covered for benefits under the terms of the contract.

(y) “Registered domestic partner” means a person who has
established a domestic partnership as described in Section 297 of
the Family Code.

(z) “Family” means the policyholder and his or her dependents.

SEC. 10.  

Section 10753.05 of the Insurance Code is amended
to read:

10753.05.  

(a) No group or individual policy or contract or
certificate of group insurance or statement of group coverage
providing benefits to employees of small employers as defined in
this chapter shall be issued or delivered by a carrier subject to the
jurisdiction of the commissioner regardless of the situs of the
contract or master policyholder or of the domicile of the carrier
nor, except as otherwise provided in Sections 10270.91 and
10270.92, shall a carrier provide coverage subject to this chapter
until a copy of the form of the policy, contract, certificate, or
statement of coverage is filed with and approved by the
commissioner in accordance with Sections 10290 and 10291, and
the carrier has complied with the requirements of Section 10753.17.

(b) (1) On and after October 1, 2013, each carrier shall fairly
and affirmatively offer, market, and sell all of the carrier’s health
benefit plans that are sold to, offered through, or sponsored by,
small employers or associations that include small employers for
plan years on or after January 1, 2014, to all small employers in
each geographic region in which the carrier makes coverage
available or provides benefits.

(2) A carrier that offers qualified health plans through the
Exchange shall be deemed to be in compliance with paragraph (1)
with respect to health benefit plans offered through the Exchange
in those geographic regions in which the carrier offers plans
through the Exchange.

(3) A carrier shall provide enrollment periods consistent with
PPACA and described in Section 155.725 of Title 45 of the Code
of Federal Regulations. Commencing January 1, 2014, a carrier
shall provide special enrollment periods consistent with the special
enrollment periods described in Section 10965.3, to the extent
permitted by PPACA, except for the triggering events identified
in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of
the Code of Federal Regulations with respect to health benefit
plans offered through the Exchange.

(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 (6), 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. Health coverage through an association that
is not related to employment shall be considered individual
coverage pursuant to Section 144.102(c) of Title 45 of the Code
of Federal Regulations.

(c) On and after October 1, 2013, each carrier shall make
available to each small employer all health benefit plans that the
carrier offers or sells to small employers or to associations that
include small employers for plan years on or after January 1, 2014.
Notwithstanding subdivision (d) of Section 10753, 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 health benefit
plans and make this summary available to small employers, agents,
and brokers upon request. The summary shall include for each
plan 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, an explanation of how creditable coverage is calculated
if a waiting 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 health benefit plan
written or issued by another carrier shall not be required to prepare
a summary brochure which includes that benefit plan.

(2) For each health benefit plan, 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 health benefit
plan written or issued by another carrier shall not be required to
prepare an evidence of coverage for that health benefit plan.

(3) 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.

(4) Notwithstanding subdivision (c) of Section 10753, 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 health benefit plans it offers to
small employers, consistent with PPACA, and provide them, upon
request, with the actual rates that would be charged to that
employer for a given health benefit plan.

(B) Notify the small employer that the agent or broker will
procure rate and benefit information for the small employer on
any health benefit plan 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.

(D) Notify the small employer of the availability of coverage
and the availability of tax credits for certain employers consistent
with PPACA and state law, including any rules, regulations, or
guidance issued in connection therewith.

(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 health benefit plans offered by the carrier
whose health benefit plan the agent or broker is presenting, provide
the small employer with the benefit summary required in paragraph
(1) of subdivision (d) and the premium 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 health benefit plan the carrier offers.

(C) Obtain a signed statement from the small employer
acknowledging that the small employer has received the disclosures
required by this paragraph and Section 10753.16.

(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 10753, 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
10753, is provided in connection with a guaranteed association.

(g) No carrier shall reject an application from a small employer
for a health benefit plan provided:

(1) The small employer as defined by subparagraph (A) of
paragraph (1) of subdivision (q) of Section 10753 offers health
benefits to 100 percent of its eligible employees as defined in
paragraph (1) of subdivision (f) of Section 10753. 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 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.

(3) Employ marketing practices or benefit designs that will have
the effect of discouraging the enrollment of individuals with
significant health needs or discriminate based on the individual’s
race, color, national origin, present or predicted disability, age,
sex, gender identity, sexual orientation, expected length of life,
degree of medical dependency, quality of life, or other health
conditions.

This subdivision shall be enforced in the same manner as Section
790.03, including through Sections 790.035 and 790.05.

(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) (1) A health benefit plan offered to a small employer, as
defined in Section 1304(b) of PPACA and in Section 10753, shall
not establish rules for eligibility, including continued eligibility,
of an individual, or dependent of an individual, to enroll under the
terms of the plan based on any of the following health status-related
factors:

(A) Health status.

(B) Medical condition, including physical and mental illnesses.

(C) Claims experience.

(D) Receipt of health care.

(E) Medical history.

(F) Genetic information.

(G) Evidence of insurability, including conditions arising out
of acts of domestic violence.

(H) Disability.

(I) Any other health status-related factor as determined by any
federal regulations, rules, or guidance issued pursuant to Section
2705 of the federal Public Health Service Act.

(2) Notwithstanding Section 10291.5, a carrier shall not require
an eligible employee or dependent to fill out a health assessment
or medical questionnaire prior to enrollment under a health benefit
plan. A carrier shall not acquire or request information that relates
to a health status-related factor from the applicant or his or her
dependent or any other source prior to enrollment of the individual.

(k) (1) A carrier shall consider as a single risk pool for rating
purposes in the small employer market the claims experience of
all insureds in all nongrandfathered small employer health benefit
plans offered by the carrier in this state, whether offered as health
care service plan contracts or health insurance policies, including
those insureds and enrollees who enroll in coverage through the
Exchange and insureds and enrollees covered by the carrier outside
of the Exchange.

(2) Each calendar year, a carrier shall establish an index rate
for the small employer market in the state based on the total
combined claims costs for providing essential health benefits, as
defined pursuant to Section 1302 of PPACA and Section 10112.27,
within the single risk pool required under paragraph (1). The index
rate shall be adjusted on a marketwide basis based on the total
expected marketwide payments and charges under the risk
adjustment and reinsurance programs established for the state
pursuant to Sections 1343 and 1341 of PPACA. The premium rate
for all of the carrier’s nongrandfathered health benefit plans shall
use the applicable index rate, as adjusted for total expected
marketwide payments and charges under the risk adjustment and
reinsurance programs established for the state pursuant to Sections
1343 and 1341 of PPACA, subject only to the adjustments
permitted under paragraph (3).

(3) A carrier may vary premium rates for a particular
nongrandfathered health benefit plan from its index rate based
only on the following actuarially justified plan-specific factors:

(A) The actuarial value and cost-sharing design of the health
benefit plan.

(B) The health benefit plan’s provider network, delivery system
characteristics, and utilization management practices.

(C) The benefits provided under the health benefit plan that are
in addition to the essential health benefits, as defined pursuant to
Section 1302 of PPACA. These additional benefits shall be pooled
with similar benefits within the single risk pool required under
paragraph (1) and the claims experience from those benefits shall
be utilized to determine rate variations for health benefit plans that
offer those benefits in addition to essential health benefits.

(D) Administrative costs, excluding any user fees required by
the Exchange.

(E) With respect to catastrophic plans, as described in subsection
(e) of Section 1302 of PPACA, the expected impact of the specific
eligibility categories for those plans.

(l) 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.

(m) (1) Except as provided in paragraph (2), this section shall
become inoperative if Section 2702 of the federal Public Health
Service Act (42 U.S.C. Sec. 300gg-1), as added by Section 1201
of PPACA, is repealed, in which case, 12 months after the repeal,
carriers subject to this section shall instead be governed by Section
10705 to the extent permitted by federal law, and all references in
this chapter to this section shall instead refer to Section 10705,
except for purposes of paragraph (2).

(2) Paragraph (3) of subdivision (b) of this section shall remain
operative as it relates to health benefit plans offered through the
Exchange.

SEC. 11.  

Section 10753.06.5 of the Insurance Code is amended
to read:

10753.06.5.  

(a) With respect to small employer health benefit
plans offered outside the Exchange, after a small employer submits
a completed application, the carrier shall, within 30 days, notify
the employer of the employer’s actual rates in accordance with
Section 10753.14. The employer shall have 30 days in which to
exercise the right to buy coverage at the quoted rates.

(b) Except as required under subdivision (c), when a small
employer submits a premium payment, based on the quoted rates,
and that payment is delivered or postmarked, whichever occurs
earlier, within the first 15 days of a month, coverage shall become
effective no later than the first day of the following month. When
that payment is neither delivered nor postmarked until after the
15th day of a month, coverage shall become effective no later than
the first day of the second month following delivery or postmark
of the payment.

(c) (1) With respect to a small employer health benefit plan
offered through the Exchange, a carrier shall apply coverage
effective dates consistent with those required under Section
155.720 of Title 45 of the Code of Federal Regulations and
paragraph (2) of subdivision (e) of Section 10965.3.

(2) With respect to a small employer health benefit plan offered
outside the Exchange for which an individual applies during a
special enrollment period described in paragraph (3) of subdivision
(b) of Section 10753.05, the following provisions shall apply:

(A) Coverage under the plan shall become effective no later
than the first day of the first calendar month beginning after the
date the carrier receives the request for special enrollment.

(B) Notwithstanding subparagraph (A), in the case of a birth,
adoption, or placement for adoption, coverage under the plan shall
become effective on the date of birth, adoption, or placement for
adoption.

(d) During the first 30 days of coverage, the small employer
shall have the option of changing coverage to a different health
benefit plan offered by the same carrier. If a small employer
notifies the carrier of the change within the first 15 days of a month,
coverage under the new health benefit plan shall become effective
no later than the first day of the following month. If a small
employer notifies the carrier of the change after the 15th day of a
month, coverage under the new health benefit plan shall become
effective no later than the first day of the second month following
notification.

(e) All eligible employees and dependents listed on a small
employer’s completed application shall be covered on the effective
date of the health benefit plan.

SEC. 12.  

Section 10753.11 of the Insurance Code is amended
to read:

10753.11.  

(a) To the extent permitted by PPACA, a carrier
shall not be required by the provisions of this chapter to do any of
the following:

(1) Offer coverage to, or accept applications from, a small
employer where the small employer is seeking coverage for eligible
employees and dependents who do not live, work, or reside in a
carrier’s service areas.

(2) (A)  Offer coverage to, or accept applications from, a small
employer for a benefits plan design within an area if the
commissioner has found all of the following:

(i) The carrier will not have the capacity within the area in its
network of providers to deliver service adequately to the eligible
employees and dependents of that employee because of its
obligations to existing group contractholders and enrollees.

(ii) The carrier is applying this paragraph uniformly to all
employers without regard to the claims experience of those
employers, and their employees and dependents, or any health
status-related factor relating to those employees and dependents.

(iii) The action is not unreasonable or clearly inconsistent with
the intent of this chapter.

(B) A carrier that cannot offer coverage to small employers in
a specific service area because it is lacking sufficient capacity as
described in this paragraph may not offer coverage in the applicable
area to new employer groups until the later of the following dates:

(i) The 181st day after the date that coverage is denied pursuant
to this paragraph.

(ii) The date the carrier notifies the commissioner that it has
regained capacity to deliver services to small employers, and
certifies to the commissioner that from the date of the notice it will
enroll all small groups requesting coverage from the carrier until
the carrier has met the requirements of subdivision (g) of Section
10753.05.

(C) Subparagraph (B) shall not limit the carrier’s ability to renew
coverage already in force or relieve the carrier of the responsibility
to renew that coverage as described in Sections 10273.4 and
10753.13.

(D) Coverage offered within a service area after the period
specified in subparagraph (B) shall be subject to the requirements
of this section.

SEC. 13.  

Section 10753.12 of the Insurance Code is amended
to read:

10753.12.  

(a) A carrier shall not be required to offer coverage
or accept applications for benefit plan designs pursuant to this
chapter where the carrier demonstrates to the satisfaction of the
commissioner both of the following:

(1) The acceptance of an application or applications would place
the carrier in a financially impaired condition.

(2) The carrier is applying this subdivision uniformly to all
employers without regard to the claims experience of those
employers and their employees and dependents or any health
status-related factor relating to those employees and dependents.

(b) The commissioner’s determination under subdivision (a)
shall follow an evaluation that includes a certification by the
commissioner that the acceptance of an application or applications
would place the carrier in a financially impaired condition.

(c) A carrier that has not offered coverage or accepted
applications pursuant to this chapter shall not offer coverage or
accept applications for any individual or group health benefit plan
until the later of the following dates:

(1) The 181st day after the date that coverage is denied pursuant
to this section.

(2) The date on which the carrier ceases to be financially
impaired, as determined by the commissioner.

(d) Subdivision (c) shall not limit the carrier’s ability to renew
coverage already in force or relieve the carrier of the responsibility
to renew that coverage as described in Sections 10273.4, 10273.6,
and 10753.13.

(e) Coverage offered within a service area after the period
specified in subdivision (c) shall be subject to the requirements of
this section.

SEC. 14.  

Section 10753.14 of the Insurance Code is amended
to read:

10753.14.  

(a) The premium rate for a small employer health
benefit plan issued, amended, or renewed on or after January 1,
2014, shall vary with respect to the particular coverage involved
only by the following:

(1) Age, pursuant to the age bands established by the United
States Secretary of Health and Human Services and the age rating
curve established by the Centers for Medicare and Medicaid
Services pursuant to Section 2701(a)(3) of the federal Public Health
Service Act (42 U.S.C. Sec. 300gg(a)(3)). Rates based on age shall
be determined using the individual’s age as of the date of the plan
issuance or renewal, as applicable, and shall not vary by more than
three to one for like individuals of different age who are 21 years
of age or older as described in federal regulations adopted pursuant
to Section 2701(a)(3) of the federal Public Health Service Act (42
U.S.C. Sec. 300gg(a)(3)).

(2) (A) Geographic region. The geographic regions for purposes
of rating shall be the following:

(i) Region 1 shall consist of the Counties of Alpine, Amador,
Butte, Calaveras, Colusa, Del Norte, Glenn, Humboldt, Lake,
Lassen, Mendocino, Modoc, Nevada, Plumas, Shasta, Sierra,
Siskiyou, Sutter, Tehama, Trinity, Tuolumne, and Yuba.

(ii) Region 2 shall consist of the Counties of Marin, Napa,
Solano, and Sonoma.

(iii) Region 3 shall consist of the Counties of El Dorado, Placer,
Sacramento, and Yolo.

(iv) Region 4 shall consist of the City and County of San
Francisco.

(v) Region 5 shall consist of the County of Contra Costa.

(vi) Region 6 shall consist of the County of Alameda.

(vii) Region 7 shall consist of the County of Santa Clara.

(viii) Region 8 shall consist of the County of San Mateo.

(ix) Region 9 shall consist of the Counties of Monterey, San
Benito, and Santa Cruz.

(x) Region 10 shall consist of the Counties of Mariposa, Merced,
San Joaquin, Stanislaus, and Tulare.

(xi) Region 11 shall consist of the Counties of Fresno, Kings,
and Madera.

(xii) Region 12 shall consist of the Counties of San Luis Obispo,
Santa Barbara, and Ventura.

(xiii) Region 13 shall consist of the Counties of Imperial, Inyo,
and Mono.

(xiv) Region 14 shall consist of the County of Kern.

(xv) Region 15 shall consist of the ZIP Codes in the County of
Los Angeles starting with 906 to 912, inclusive, 915, 917, 918,
and 935.

(xvi) Region 16 shall consist of the ZIP Codes in the County of
Los Angeles other than those identified in clause (xv).

(xvii) Region 17 shall consist of the Counties of Riverside and
San Bernardino.

(xviii) Region 18 shall consist of the County of Orange.

(xix) Region 19 shall consist of the County of San Diego.

(B) No later than June 1, 2017, the department, in collaboration
with the Exchange and the Department of Managed Health Care,
shall review the geographic rating regions specified in this
paragraph and the impacts of those regions on the health care
coverage market in California, and submit a report to the
appropriate policy committees of the Legislature. The requirement
for submitting a report imposed under this subparagraph is
inoperative June 1, 2021, pursuant to Section 10231.5 of the
Government Code.

(3) Whether the health benefit plan covers an individual or
family, as described in PPACA.

(b) The rate for a health benefit plan subject to this section shall
not vary by any factor not described in this section.

(c) The total premium charged to a small employer pursuant to
this section shall be determined by summing the premiums of
covered employees and dependents in accordance with Section
147.102(c)(1) of Title 45 of the Code of Federal Regulations.

(d) The rating period for rates subject to this section shall be no
less than 12 months from the date of issuance or renewal of the
health benefit plan.

(e) If Section 2701 of the federal Public Health Service Act (42
U.S.C. Sec. 300gg), as added by Section 1201 of PPACA, is
repealed, this section shall become inoperative 12 months after
the repeal date, in which case rates for health benefit plans subject
to this section shall instead be subject to Section 10714, to the
extent permitted by federal law, and all references to this section
shall be deemed to be references to Section 10714.

SEC. 15.  

Section 10902.4 of the Insurance Code is repealed.

SEC. 16.  

The heading of Chapter 9.7 (commencing with
Section 10950) of Part 2 of Division 2 of the Insurance Code is
amended to read:

 

Chapter  9.7. Child Access to Health Insurance

 

SEC. 17.  

Section 10954 of the Insurance Code is amended to
read:

10954.  

(a) A carrier may use the following characteristics of
an eligible child for purposes of establishing the rate of the health
benefit plan for that child, where consistent with federal regulations
under PPACA: age, geographic region, and family composition,
plus the health benefit plan selected by the child or the responsible
party for a child.

(b) From the effective date of this chapter to December 31,
2013, inclusive, rates for a child applying for coverage shall be
subject to the following limitations:

(1) During any open enrollment period or for late enrollees, the
rate for any child due to health status shall not be more than two
times the standard risk rate for a child.

(2) The rate for a child shall be subject to a 20-percent surcharge
above the highest allowable rate on a child applying for coverage
who is not a late enrollee and who failed to maintain coverage with
any carrier or health care service plan for the 90-day period prior
to the date of the child’s application. The surcharge shall apply
for the 12-month period following the effective date of the child’s
coverage.

(3) If expressly permitted under PPACA and any rules,
regulations, or guidance issued pursuant to that act, a carrier may
rate a child based on health status during any period other than an
open enrollment period if the child is not a late enrollee.

(4) If expressly permitted under PPACA and any rules,
regulations, or guidance issued pursuant to that act, a carrier may
condition an offer or acceptance of coverage on any preexisting
condition or other health status-related factor for a period other
than an open enrollment period and for a child who is not a late
enrollee.

(c) For any individual health benefit plan issued, sold, or
renewed prior to December 31, 2013, the carrier shall provide to
a child or responsible party for a child a notice that states the
following:

“Please consider your options carefully before failing to maintain
or renewing coverage for a child for whom you are responsible.
If you attempt to obtain new individual coverage for that child,
the premium for the same coverage may be higher than the
premium you pay now.”

(d) A child who applied for coverage between September 23,
2010, and the end of the initial enrollment period shall be deemed
to have maintained coverage during that period.

(e) Effective January 1, 2014, except for individual
grandfathered health plan coverage, the rate for any child shall be
identical to the standard risk rate.

(f) Carriers shall not require documentation from applicants
relating to their coverage history.

(g) (1) On and after the operative date of the act adding this
subdivision, and until January 1, 2014, a carrier shall provide the
model notice, as provided in paragraph (3), to all applicants for
coverage under this chapter and to all insureds, or the responsible
party for an insured, renewing coverage under this chapter that
contains the following information:

(A) Information about the open enrollment period provided
under Section 10965.3.

(B) An explanation that obtaining coverage during the open
enrollment period described in Section 10965.3 will not affect the
effective dates of coverage for coverage purchased pursuant to
this chapter unless the applicant cancels that coverage.

(C) An explanation that coverage purchased pursuant to this
chapter shall be effective as required under subdivision (d) of
Section 10951 and that such coverage shall not prevent an applicant
from obtaining new coverage during the open enrollment period
described in Section 10965.3.

(D) Information about the Medi-Cal program, information about
the Healthy Families Program if the Healthy Families Program is
accepting enrollment, and information about subsidies available
through the California Health Benefit Exchange.

(2) The notice described in paragraph (1) shall be in plain
language and 14-point type.

(3) The department shall adopt a uniform model notice to be
used by carriers in order to comply with this subdivision, and shall
consult with the Department of Managed Health Care in adopting
that uniform model notice. Use of the model notice shall not require
prior approval of the department. The adoption of the model notice
by the department for purposes of this section shall not be subject
to the Administrative Procedure Act (Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code).

SEC. 18.  

Section 10960.5 is added to the Insurance Code, to
read:

10960.5.  

(a) This chapter shall become inoperative on January
1, 2014, or the 91st calendar day following the adjournment of the
2013-14 First Extraordinary Session, whichever date is later.

(b) If Section 5000A of the Internal Revenue Code, as added
by Section 1501 of PPACA, is repealed or amended to no longer
apply to the individual market, as defined in Section 2791 of the
federal Public Health Service Act (42 U.S.C. Sec. 300gg-4), this
chapter shall become operative 12 months after the date of that
repeal or amendment.

SEC. 19.  

Chapter 9.9 (commencing with Section 10965) is
added to Part 2 of Division 2 of the Insurance Code, to read:

 

Chapter  9.9. Individual Access to Health Insurance

 

10965.  

For purposes of this chapter, the following definitions
shall apply:

(a) “Child” means a child described in Section 22775 of the
Government Code and subdivisions (n) to (p), inclusive, of Section
599.500 of Title 2 of the California Code of Regulations.

(b) “Dependent” means the spouse or registered domestic
partner, or child, of an individual, subject to applicable terms of
the health benefit plan.

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

(d) “Family” means the policyholder and dependent or
dependents.

(e) “Grandfathered health plan” has the same meaning as that
term is defined in Section 1251 of PPACA.

(f) “Health benefit plan” means any individual or group policy
of health insurance, as defined in Section 106. The term does not
include a health insurance 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),
subject to Section 10965.01 a health insurance policy 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), the Access for Infants and Mothers
Program (Part 6.3 (commencing with Section 12695) of Division
2), or the program under Part 6.4 (commencing with Section
12699.50) of Division 2, or Medicare supplement coverage, to the
extent consistent with PPACA or a specified disease or hospital
indemnity policy, subject to Section 10965.01.

(g) “Policy year” means the period from January 1 to December
31, inclusive.

(h) “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 pursuant to that law.

(i) “Preexisting condition provision” means a policy provision
that excludes coverage for charges or expenses incurred during a
specified period following the insured’s effective date of coverage,
as to a condition for which medical advice, diagnosis, care, or
treatment was recommended or received during a specified period
immediately preceding the effective date of coverage.

(j) “Rating period” means the calendar year for which premium
rates are in effect pursuant to subdivision (d) of Section 10965.9.

(k) “Registered domestic partner” means a person who has
established a domestic partnership as described in Section 297 of
the Family Code.

10965.01.  

(a) For purposes of this chapter, “health benefit
plan” does not include policies or certificates of specified disease
or hospital confinement indemnity provided that the carrier offering
those policies or certificates complies with the following:

(1) The carrier files, on or before March 1 of each year, a
certification with the commissioner that contains the statement
and information described in paragraph (2).

(2) The certification required in paragraph (1) shall contain the
following:

(A) A statement from the carrier certifying that policies or
certificates described in this section (i) are being offered and
marketed as supplemental health insurance and not as a substitute
for coverage that provides essential health benefits as defined by
the state pursuant to Section 1302 of PPACA, and (ii) the disclosure
forms as described in Section 10603 contains the following
statement prominently on the first page:

“This is a supplement to health insurance. It is not a substitute
for essential health benefits or minimum essential coverage as
defined in federal law.”

(B) A summary description of each policy or certificate
described in this section, including the average annual premium
rates, or range of premium rates in cases where premiums vary by
age, gender, or other factors, charged for the policies and
certificates issued or delivered in this state.

(3) In the case of a policy or certificate that is described in this
section and that is offered in this state on or after January 1, 2014,
the carrier files with the commissioner the information and
statement required in paragraph (2) at least 30 days prior to the
date such a policy or certificate is issued or delivered in this state.

(4) The carrier issuing a policy or certificate of specified disease
or a policy or certificate of hospital confinement indemnity requires
that the person to be insured is covered by an individual or group
policy or contract that arranges or provides medical, hospital, and
surgical coverage not designed to supplement other private or
governmental plans.

(b) As used in this section, “policies or certificates of specified
disease” and “policies or certificates of hospital confinement
indemnity” mean policies or certificates of insurance sold to an
insured to supplement other health insurance coverage as specified
in this section.

10965.1.  

Except as provided in Section 10965.15, the
provisions of this chapter shall only apply with respect to
nongrandfathered individual health benefit plans offered by a health
insurer, and shall apply in addition to other provisions of this
chapter and the rules adopted thereunder.

10965.3.  

(a) (1) On and after October 1, 2013, a health insurer
shall fairly and affirmatively offer, market, and sell all of the
insurer’s health benefit plans that are sold in the individual market
for policy years on or after January 1, 2014, to all individuals and
dependents in each service area in which the insurer provides or
arranges for the provision of health care services. A health insurer
shall limit enrollment in individual health benefit plans to open
enrollment periods and special enrollment periods as provided in
subdivisions (c) and (d).

(2) A health insurer shall allow the policyholder of an individual
health benefit plan to add a dependent to the policyholder’s health
benefit plan at the option of the policyholder, consistent with the
open enrollment, annual enrollment, and special enrollment period
requirements in this section.

(b) An individual health benefit plan issued, amended, or
renewed on or after January 1, 2014, shall not impose any
preexisting condition provision upon any individual.

(c) (1) A health insurer shall provide an initial open enrollment
period from October 1, 2013, to March 31, 2014, inclusive, and
annual enrollment periods for plan years on or after January 1,
2015, from October 15 to December 7, inclusive, of the preceding
calendar year.

(2) Pursuant to Section 147.104(b)(2) of Title 45 of the Code
of Federal Regulations, for individuals enrolled in noncalendar-year
individual health plan contracts, a plan shall provide a limited open
enrollment period beginning on the date that is 30 calendar days
prior to the date the policy year ends in 2014.

(d) (1) Subject to paragraph (2), commencing January 1, 2014,
a health insurer shall allow an individual to enroll in or change
individual health benefit plans as a result of the following triggering
events:

(A) He or she or his or her dependent loses minimum essential
coverage. For purposes of this paragraph, both of the following
definitions shall apply:

(i) “Minimum essential coverage” has the same meaning as that
term is defined in subsection (f) of Section 5000A of the Internal
Revenue Code (26 U.S.C. Sec. 5000A).

(ii) “Loss of minimum essential coverage” includes, but is not
limited to, loss of that coverage due to the circumstances described
in Section 54.9801-6(a)(3)(i) to (iii), inclusive, of Title 26 of the
Code of Federal Regulations and the circumstances described in
Section 1163 of Title 29 of the United States Code. “Loss of
minimum essential coverage” also includes loss of that coverage
for a reason that is not due to the fault of the individual.

(iii) “Loss of minimum essential coverage” does not include
loss of that coverage due to the individual’s failure to pay
premiums on a timely basis or situations allowing for a rescission,
subject to clause (ii) and Sections 10119.2 and 10384.17.

(B) He or she gains a dependent or becomes a dependent.

(C) He or she is mandated to be covered as a dependent pursuant
to a valid state or federal court order.

(D) He or she has been released from incarceration.

(E) His or her health coverage issuer substantially violated a
material provision of the health coverage contract.

(F) He or she gains access to new health benefit plans as a result
of a permanent move.

(G) He or she was receiving services from a contracting provider
under another health benefit plan, as defined in Section 10965 or
Section 1399.845 of the Health and Safety Code for one of the
conditions described in subdivision (a) of Section 10133.56 and
that provider is no longer participating in the health benefit plan.

(H) He or she demonstrates to the Exchange, with respect to
health benefit plans offered through the Exchange, or to the
department, with respect to health benefit plans offered outside
the Exchange, that he or she did not enroll in a health benefit plan
during the immediately preceding enrollment period available to
the individual because he or she was misinformed that he or she
was covered under minimum essential coverage.

begin insert

(I) He or she is a member of the reserve forces of the United
States military returning from active duty or a member of the
California National Guard returning from active duty service
under Title 32 of the United States Code.

end insert begin delete

(I)

end delete

begin insert (J) end insert  With respect to individual health benefit plans offered
through the Exchange, in addition to the triggering events listed
in this paragraph, any other events listed in Section 155.420(d) of
Title 45 of the Code of Federal Regulations.

(2) With respect to individual health benefit plans offered
outside the Exchange, an individual shall have 60 days from the
date of a triggering event identified in paragraph (1) to apply for
coverage from a health care service plan subject to this section.
With respect to individual health benefit plans offered through the
Exchange, an individual shall have 60 days from the date of a
triggering event identified in paragraph (1) to select a plan offered
through the Exchange, unless a longer period is provided in Part
155 (commencing with Section 155.10) of Subchapter B of Subtitle
A of Title 45 of the Code of Federal Regulations.

(e) With respect to individual health benefit plans offered
through the Exchange, the effective date of coverage required
pursuant to this section shall be consistent with the dates specified
in Section 155.410 or 155.420 of Title 45 of the Code of Federal
Regulations, as applicable. A dependent who is a registered
domestic partner pursuant to Section 297 of the Family Code shall
have the same effective date of coverage as a spouse.

(f) With respect to an individual health benefit plan offered
outside the Exchange, the following provisions shall apply:

(1) After an individual submits a completed application form
for a plan, the insurer shall, within 30 days, notify the individual
of the individual’s actual premium charges for that plan established
in accordance with Section 10965.9. The individual shall have 30
days in which to exercise the right to buy coverage at the quoted
premium charges.

(2) With respect to an individual health benefit plan for which
an individual applies during the initial open enrollment period
described in subdivision (c), when the policyholder submits a
premium payment, based on the quoted premium charges, and that
payment is delivered or postmarked, whichever occurs earlier, by
December 15, 2013, coverage under the individual health benefit
plan shall become effective no later than January 1, 2014. When
that payment is delivered or postmarked within the first 15 days
of any subsequent month, coverage shall become effective no later
than the first day of the following month. When that payment is
delivered or postmarked between December 16, 2013, and
December 31, 2013, inclusive, or after the 15th day of any
subsequent month, coverage shall become effective no later than
the first day of the second month following delivery or postmark
of the payment.

(3) With respect to an individual health benefit plan for which
an individual applies during the annual open enrollment period
described in subdivision (c), when the individual submits a
premium payment, based on the quoted premium charges, and that
payment is delivered or postmarked, whichever occurs later, by
December 15, coverage shall become effective as of the following
January 1. When that payment is delivered or postmarked within
the first 15 days of any subsequent month, coverage shall become
effective no later than the first day of the following month. When
that payment is delivered or postmarked between December 16
and December 31, inclusive, or after the 15th day of any subsequent
month, coverage shall become effective no later than the first day
of the second month following delivery or postmark of the
payment.

(4) With respect to an individual health benefit plan for which
an individual applies during a special enrollment period described
in subdivision (d), the following provisions shall apply:

(A) When the individual submits a premium payment, based
on the quoted premium charges, and that payment is delivered or
postmarked, whichever occurs earlier, within the first 15 days of
the month, coverage under the plan shall become effective no later
than the first day of the following month. When the premium
payment is neither delivered nor postmarked until after the 15th
day of the month, coverage shall become effective no later than
the first day of the second month following delivery or postmark
of the payment.

(B) Notwithstanding subparagraph (A), in the case of a birth,
adoption, or placement for adoption, the coverage shall be effective
on the date of birth, adoption, or placement for adoption.

(C) Notwithstanding subparagraph (A), in the case of marriage
or becoming a registered domestic partner or in the case where a
qualified individual loses minimum essential coverage, the
coverage effective date shall be the first day of the month following
the date the insurer receives the request for special enrollment.

(g) (1) A health insurer shall not establish rules for eligibility,
including continued eligibility, of any individual to enroll under
the terms of an individual health benefit plan based on any of the
following factors:

(A) Health status.

(B) Medical condition, including physical and mental illnesses.

(C) Claims experience.

(D) Receipt of health care.

(E) Medical history.

(F) Genetic information.

(G) Evidence of insurability, including conditions arising out
of acts of domestic violence.

(H) Disability.

(I) Any other health status-related factor as determined by any
federal regulations, rules, or guidance issued pursuant to Section
2705 of the federal Public Health Service Act.

(2) Notwithstanding subdivision (c) of Section 10291.5, a health
insurer shall not require an individual applicant or his or her
dependent to fill out a health assessment or medical questionnaire
prior to enrollment under an individual health benefit plan. A health
insurer shall not acquire or request information that relates to a
health status-related factor from the applicant or his or her
dependent or any other source prior to enrollment of the individual.

(h) (1) A health insurer shall consider as a single risk pool for
rating purposes in the individual market the claims experience of
all insureds and enrollees in all nongrandfathered individual health
benefit plans offered by that insurer in this state, whether offered
as health care service plan contracts or individual health insurance
policies, including those insureds who enroll in individual coverage
through the Exchange and insureds who enroll in individual
coverage outside the Exchange. Student health insurance coverage,
as such coverage is defined at Section 147.145(a) of Title 45 of
the Code of Federal Regulations, shall not be included in a health
insurer’s single risk pool for individual coverage.

(2) Each calendar year, a health insurer shall establish an index
rate for the individual market in the state based on the total
combined claims costs for providing essential health benefits, as
defined pursuant to Section 1302 of PPACA, within the single risk
pool required under paragraph (1). The index rate shall be adjusted
on a marketwide basis based on the total expected marketwide
payments and charges under the risk adjustment and reinsurance
programs established for the state pursuant to Sections 1343 and
1341 of PPACA. The premium rate for all of the health insurer’s
health benefit plans in the individual market shall use the applicable
index rate, as adjusted for total expected marketwide payments
and charges under the risk adjustment and reinsurance programs
established for the state pursuant to Sections 1343 and 1341 of
PPACA, subject only to the adjustments permitted under paragraph
(3).

(3) A health insurer may vary premium rates for a particular
health benefit plan from its index rate based only on the following
actuarially justified plan-specific factors:

(A) The actuarial value and cost-sharing design of the health
benefit plan.

(B) The health benefit plan’s provider network, delivery system
characteristics, and utilization management practices.

(C) The benefits provided under the health benefit plan that are
in addition to the essential health benefits, as defined pursuant to
Section 1302 of PPACA and Section 10112.27. These additional
benefits shall be pooled with similar benefits within the single risk
pool required under paragraph (1) and the claims experience from
those benefits shall be utilized to determine rate variations for
plans that offer those benefits in addition to essential health
benefits.

(D) With respect to catastrophic plans, as described in subsection
(e) of Section 1302 of PPACA, the expected impact of the specific
eligibility categories for those plans.

(E) Administrative costs, excluding any user fees required by
the Exchange.

(i) This section shall only apply with respect to individual health
benefit plans for policy years on or after January 1, 2014.

(j) This section shall not apply to an individual health benefit
plan that is a grandfathered health plan.

(k) If Section 5000A of the Internal Revenue Code, as added
by Section 1501 of PPACA, is repealed or amended to no longer
apply to the individual market, as defined in Section 2791 of the
federal Public Health Service Act (42 U.S.C. Sec. 300gg-4),
subdivisions (a), (b), and (g) shall become inoperative 12 months
after the date of that repeal or amendment and individual health
care benefit plans shall thereafter be subject to Sections 10901.2,
10951, and 10953.

10965.5.  

(a) Commencing on October 1, 2013, a health insurer
or agent or broker shall not, directly or indirectly, engage in the
following activities:

(1) Encourage or direct an individual to refrain from filing an
application for individual coverage with an insurer because of the
health status, claims experience, industry, occupation, or
geographic location, provided that the location is within the
insurer’s approved service area, of the individual.

(2) Encourage or direct an individual to seek individual coverage
from another health care service plan or health insurer or the
California Health Benefit Exchange because of the health status,
claims experience, industry, occupation, or geographic location,
provided that the location is within the insurer’s approved service
area, of the individual.

(3) Employ marketing practices or benefit designs that will have
the effect of discouraging the enrollment of individuals with
significant health needs or discriminate based on an individual’s
race, color, national origin, present or predicted disability, age,
sex, gender identity, sexual orientation, expected length of life,
degree of medical dependency, quality of life, or other health
conditions.

(b) Commencing on October 1, 2013, a health insurer shall not,
directly or indirectly, enter into any contract, agreement, or
arrangement with a broker or agent that provides for or results in
the compensation paid to a broker or agent for the sale of an
individual health benefit plan to be varied because of the health
status, claims experience, industry, occupation, or geographic
location of the individual. This subdivision does not apply to a
compensation arrangement that provides compensation to a broker
or agent 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
individual.

(c) This section shall only apply with respect to individual health
benefit plans for policy years on or after January 1, 2014.

(d) This section shall be enforced in the same manner as Section
790.03, including through Sections 790.05 and 790.035.

10965.7.  

(a) An individual health benefit plan shall be
renewable at the option of the insured except as permitted to be
canceled, rescinded, or not renewed pursuant to Section 155.430(b)
of Title 45 of the Code of Federal Regulations.

(b) Any insurer that ceases to offer for sale new individual health
benefit plans pursuant to Section 10273.6 shall continue to be
governed by this chapter with respect to business conducted under
this chapter.

10965.9.  

(a) With respect to individual health benefit plans
issued, amended, or renewed on or after January 1, 2014, a health
insurer may use only the following characteristics of an individual,
and any dependent thereof, for purposes of establishing the rate
of the individual health benefit plan covering the individual and
the eligible dependents thereof, along with the health benefit plan
selected by the individual:

(1) Age, pursuant to the age bands established by the United
States Secretary of Health and Human Services and the age rating
curve established by the federal Centers for Medicare and Medicaid
Services pursuant to Section 2701(a)(3) of the federal Public Health
Service Act (42 U.S.C. Sec. 300gg(a)(3)). Rates based on age shall
be determined using the individual’s age as of the date of the plan
issuance or renewal, as applicable, and shall not vary by more than
three to one for like individuals of different ages who are 21 years
of age or older as described in federal regulations adopted pursuant
to Section 2701(a)(3) of the federal Public Health Service Act (42
U.S.C. Sec. 300gg(a)(3)).

(2) (A) Geographic region. The geographic regions for purposes
of rating shall be the following:

(i) Region 1 shall consist of the Counties of Alpine, Amador,
Butte, Calaveras, Colusa, Del Norte, Glenn, Humboldt, Lake,
Lassen, Mendocino, Modoc, Nevada, Plumas, Shasta, Sierra,
Siskiyou, Sutter, Tehama, Trinity, Tuolumne, and Yuba.

(ii) Region 2 shall consist of the Counties of Marin, Napa,
Solano, and Sonoma.

(iii) Region 3 shall consist of the Counties of El Dorado, Placer,
Sacramento, and Yolo.

(iv) Region 4 shall consist of the City and County of San
Francisco.

(v) Region 5 shall consist of the County of Contra Costa.

(vi) Region 6 shall consist of the County of Alameda.

(vii) Region 7 shall consist of the County of Santa Clara.

(viii) Region 8 shall consist of the County of San Mateo.

(ix) Region 9 shall consist of the Counties of Monterey, San
Benito, and Santa Cruz.

(x) Region 10 shall consist of the Counties of Mariposa, Merced,
San Joaquin, Stanislaus, and Tulare.

(xi) Region 11 shall consist of the Counties of Fresno, Kings,
and Madera.

(xii) Region 12 shall consist of the Counties of San Luis Obispo,
Santa Barbara, and Ventura.

(xiii) Region 13 shall consist of the Counties of Imperial, Inyo,
and Mono.

(xiv) Region 14 shall consist of the County of Kern.

(xv) Region 15 shall consist of the ZIP Codes in the County of
Los Angeles starting with 906 to 912, inclusive, 915, 917, 918,
and 935.

(xvi) Region 16 shall consist of the ZIP Codes in the County of
Los Angeles other than those identified in clause (xv).

(xvii) Region 17 shall consist of the Counties of Riverside and
San Bernardino.

(xviii) Region 18 shall consist of the County of Orange.

(xix) Region 19 shall consist of the County of San Diego.

(B) No later than June 1, 2017, the department, in collaboration
with the Exchange and the Department of Managed Heath Care,
shall review the geographic rating regions specified in this
paragraph and the impacts of those regions on the health care
coverage market in California, and make a report to the appropriate
policy committees of the Legislature.

(3) Whether the plan covers an individual or family, as described
in PPACA.

(b) The rate for a health benefit plan subject to this section shall
not vary by any factor not described in this section.

(c) With respect to family coverage under an individual health
benefit plan, the rating variation permitted under paragraph (1) of
subdivision (a) shall be applied based on the portion of the
premium attributable to each family member covered under the
plan. The total premium for family coverage shall be determined
by summing the premiums for each individual family member. In
determining the total premium for family members, premiums for
no more than the three oldest family members who are under 21
years of age shall be taken into account.

(d) The rating period for rates subject to this section shall be
from January 1 to December 31, inclusive.

(e) This section shall not apply to an individual health benefit
plan that is a grandfathered health plan.

(f) The requirement for submitting a report imposed under
subparagraph (B) of paragraph (2) of subdivision (a) is inoperative
on June 1, 2021, pursuant to Section 10231.5 of the Government
Code.

(g) If Section 5000A of the Internal Revenue Code, as added
by Section 1501 of PPACA, is repealed or amended to no longer
apply to the individual market, as defined in Section 2791 of the
federal Public Health Service Act (42 U.S.C. Sec. 300gg-4), this
section shall become inoperative 12 months after the date of that
repeal or the amendment.

10965.11.  

(a) A health insurer shall not be required to offer
an individual health benefit plan or accept applications for the plan
pursuant to Section 10965.3 in the case of any of the following:

(1) To an individual who does not live or reside within the
insurer’s approved service areas.

(2) (A) Within a specific service area or portion of a service
area, if the insurer reasonably anticipates and demonstrates to the
satisfaction of the commissioner both of the following:

(i) It will not have sufficient health care delivery resources to
ensure that health care services will be available and accessible to
the individual because of its obligations to existing insureds.

(ii) It is applying this subparagraph uniformly to all individuals
without regard to the claims experience of those individuals or any
health status-related factor relating to those individuals.

(B) A health insurer that cannot offer an individual health benefit
plan to individuals because it is lacking in sufficient health care
delivery resources within a service area or a portion of a service
area pursuant to subparagraph (A) shall not offer an individual
health benefit plan in that area until the later of the following dates:

(i) The 181st day after the date coverage is denied pursuant to
this paragraph.

(ii) The date the insurer notifies the commissioner that it has
the ability to deliver services to individuals, and certifies to the
commissioner that from the date of the notice it will enroll all
individuals requesting coverage in that area from the insurer.

(C) Subparagraph (B) shall not limit the insurer’s ability to
renew coverage already in force or relieve the insurer of the
responsibility to renew that coverage as described in Section
10273.6.

(D) Coverage offered within a service area after the period
specified in subparagraph (B) shall be subject to this section.

(b) (1) A health insurer may decline to offer an individual health
benefit plan to an individual if the insurer demonstrates to the
satisfaction of the commissioner both of the following:

(A) It does not have the financial reserves necessary to
underwrite additional coverage. In determining whether this
subparagraph has been satisfied, the commissioner shall consider,
but not be limited to, the insurer’s compliance with the
requirements of this part and the rules adopted thereunder.

(B) It is applying this subdivision uniformly to all individuals
without regard to the claims experience of those individuals or any
health status-related factor relating to those individuals.

(2) A health insurer that denies coverage to an individual under
paragraph (1) shall not offer coverage before the later of the
following dates:

(A) The 181st day after the date coverage is denied pursuant to
this subdivision.

(B) The date the insurer demonstrates to the satisfaction of the
commissioner that the insurer has sufficient financial reserves
necessary to underwrite additional coverage.

(3) Paragraph (2) shall not limit the insurer’s ability to renew
coverage already in force or relieve the insurer of the responsibility
to renew that coverage as described in Section 10273.6.

(C) Coverage offered within a service area after the period
specified in paragraph (2) shall be subject to this section.

(c) Nothing in this chapter shall be construed to limit the
commissioner’s authority to develop and implement a plan of
rehabilitation for a health insurer whose financial viability or
organizational and administrative capacity has become impaired,
to the extent permitted by PPACA.

(d) This section shall not apply to an individual health benefit
plan that is a grandfathered plan.

10965.13.  

(a) A health insurer that receives an application for
an individual health benefit plan outside the Exchange during the
initial open enrollment period, an annual enrollment period, or a
special enrollment period described in Section 10965.3 shall inform
the applicant that he or she may be eligible for lower cost coverage
through the Exchange and shall inform the applicant of the
applicable enrollment period provided through the Exchange
described in Section 10965.3.

(b) On or before October 1, 2013, and annually every October
1 thereafter, a health insurer shall issue a notice to a policyholder
enrolled in an individual health benefit plan offered outside the
Exchange. The notice shall inform the policyholder that he or she
may be eligible for lower cost coverage through the Exchange and
shall inform the policyholder of the applicable open enrollment
period provided through the Exchange described in Section
10965.3.

(c) This section shall not apply where the individual health
benefit plan described in subdivision (a) or (b) is a grandfathered
health plan.

10965.15.  

(a) On or before October 1, 2013, and annually
every October 1 thereafter, a health insurer shall issue the following
notice to all policyholders enrolled in an individual health benefit
plan that is a grandfathered health plan:

New improved health insurance options are available in
California. You currently have health insurance that is not required
to follow many of the new laws. For example, your policy may
not provide preventive health services without you having to pay
any cost sharing (copayments or coinsurance). Also your current
policy may be allowed to increase your rates based on your health
status while new policies cannot. You have the option to remain
in your current policy or switch to a new policy. Under the new
rules, a health insurance company cannot deny your application
based on any health conditions you may have. For more
information about your options, please contact begin delete the California
Health Benefit Exchange, end delete begin insert Covered California at ____, end insert the Office
of Patient begin delete Advocate, end delete begin insert Advocate at ____, end insert your policy representative
or begin delete an end delete insurance begin delete broker. end delete begin insert agent, or an entity paid by Covered
California to assist with health coverage enrollment, such as a
navigator or an assister. end insert

(b) Commencing October 1, 2013, a health insurer shall include
the notice described in subdivision (a) in any renewal material of
the individual grandfathered health plan and in any application for
dependent coverage under the individual grandfathered health
plan.

(c) A health insurer shall not advertise or market an individual
health benefit plan that is a grandfathered health plan for purposes
of enrolling a dependent of a policyholder into the plan for policy
years on or after January 1, 2014. Nothing in this subdivision shall
be construed to prohibit an individual enrolled in an individual
grandfathered health plan from adding a dependent to that plan to
the extent permitted by PPACA.

10965.16.  

Except as otherwise provided in this chapter, this
chapter shall be implemented to the extent that it meets or exceeds
the requirements set forth in PPACA.

10965.17.  

(a) The commissioner may, no later than December
31, 2014, adopt emergency regulations implementing this chapter.
The commissioner may 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.

(b) The initial adoption of emergency regulations implementing
this chapter and the one readoption of emergency regulation
authorized by this section shall be deemed an emergency and
necessary for the immediate preservation of the public peace,
health, safety, or general welfare. Initial emergency regulations
and the one readoption of emergency regulations authorized by
this section shall be exempt from review by the Office of
Administrative Law. The initial emergency regulations and the
one 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 one year, by which time final regulations may be
adopted. The commissioner shall consult with the Director of the
Department of Managed Health Care prior to adopting any
regulations pursuant to this subdivision for the specific purpose
of ensuring, to the extent practical, that there is consistency of
regulations applicable to entities regulated by the commissioner
and those regulated by the Department of Managed Health Care.

SEC. 20.  

 The Insurance Commissioner may adopt regulations,
to implement the changes made to the Insurance Code by this act,
pursuant to the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code). The commissioner shall consult with
the Director of the Department of Managed Health Care prior to
adopting any regulations pursuant to this subdivision for the
specific purpose of ensuring, to the extent practical, that there is
consistency of regulations applicable to entities regulated by the
commissioner and those regulated by the Department of Managed
Health Care.

SEC. 21.  

This bill shall become operative only if Senate Bill
2 of the 2013-14 First Extraordinary Session is enacted and
becomes effective.