California Legislature—2013–14 Regular Session

Assembly Bill No. 725

Introduced by Assembly Member Wilk

February 21, 2013

An act to amend Section 1367.003 of the Health and Safety Code, relating to health care coverage.

LEGISLATIVE COUNSEL’S DIGEST

AB 725, as introduced, Wilk. Health care coverage.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law prohibits a health care service plan from expending for administrative costs, as defined, an excessive amount of the payments the plan receives for providing health care services to its subscribers and enrollees.

The federal Patient Protection and Affordable Care Act prohibits a health insurance issuer issuing health insurance coverage from establishing lifetime limits or unreasonable annual limits on the dollar value of benefits for any participant or beneficiary, as specified. The act also requires a health insurance issuer issuing health insurance coverage to comply with minimum medical loss ratios and to provide an annual rebate to each insured if the medical loss ratio of the amount of the revenue expended by the issuer on costs to the total amount of premium revenue is less than a certain percentage, as specified.

Existing law requires health care service plans and health insurers to comply with the requirements imposed under those federal provisions, as specified. Existing law authorizes the Director of the Department of Managed Health Care and the Insurance Commissioner to promulgate regulations and emergency regulations to implement requirements relating to medical loss ratios, as specified.

This bill would make technical, nonsubstantive changes to those provisions.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

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

SECTION 1.  

Section 1367.003 of the Health and Safety Code
is amended to read:

1367.003.  

(a) Every health care service plan that issues, sells,
renews, or offers health care service plan contracts for health care
coverage in this state, including a grandfathered health plan, but
not including specialized health care service plan contracts, shall
provide an annual rebate to each enrollee under such coverage, on
a pro rata basis, if the ratio of the amount of premium revenue
expended by the health care service plan on the costs for
reimbursement for clinical services provided to enrollees under
such coverage and for activities that improve health care quality
to the total amount of premium revenue, excluding federal and
state taxes and licensing or regulatory fees and after accounting
for payments or receipts for risk adjustment, risk corridors, and
reinsurance, is less than the following:

(1) With respect to a health care service plan offering coverage
in the large group market, 85 percent.

(2) With respect to a health care service plan offering coverage
in the small group market or in the individual market, 80 percent.

(b) Every health care service plan that issues, sells, renews, or
offers health care service plan contracts for health care coverage
in this state, including a grandfathered health plan, shall comply
with the following minimum medical loss ratios:

(1) With respect to a health care service plan offering coverage
in the large group market, 85 percent.

(2) With respect to a health care service plan offering coverage
in the small group market or in the individual market, 80 percent.

(c) (1) The total amount of an annual rebate required under this
section shall be calculated in an amount equal to the product of
the following:

(A) The amount by which the percentage described in paragraph
(1) or (2) of subdivision (a) exceeds the ratio described in paragraph
(1) or (2) of subdivision (a).

(B) The total amount of premium revenue, excluding federal
and state taxes and licensing or regulatory fees and after accounting
for payments or receipts for risk adjustment, risk corridors, and
reinsurance.

(2) A health care service plan shall provide any rebate owing
to an enrollee no later than August 1 of the calendar year following
the year for which the ratio described in subdivision (a) was
calculated.

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

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

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

(f) This section shall be implemented to the extent required by
federal law and shall comply with, and not exceed, the scope of
Section 2791 of the federal Public Health Service Act (42 U.S.C.
Sec. 300gg-91) and the requirements of Section 2718 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-18) and any rules
or regulations issued under those sections.

(g)  begin delete Nothing in this end delete begin insert This end insert section shall begin insert not end insert be construed to apply
to provisions of this chapter pertaining to financial statements,
assets, liabilities, and other accounting items to which subdivision
(s) of Section 1345 applies.

(h)  begin delete Nothing in this end delete begin insert This end insert section shall begin insert not end insert be construed to apply
to a health care service plan contract or insurance policy issued,
sold, renewed, or offered for health care services or coverage
provided in the Medi-Cal program (Chapter 7 (commencing with
Section 14000) of Part 3 of Division 9 of the Welfare and
Institutions Code), the Healthy Families Program (Part 6.2
(commencing with Section 12693) of Division 2 of the Insurance
Code), the Access for Infants and Mothers Program (Part 6.3
(commencing with Section 12695) of Division 2 of the Insurance
Code), the California Major Risk Medical Insurance Program (Part
6.5 (commencing with Section 12700) of Division 2 of the
Insurance Code), or the Federal Temporary High Risk Insurance
Pool (Part 6.6 (commencing with Section 12739.5) of Division 2
of the Insurance Code), to the extent consistent with the federal
Patient Protection and Affordable Care Act (Public Law 111-148).