Amended in Senate September 3, 2013

Amended in Senate August 14, 2013

Amended in Senate June 20, 2013

Amended in Assembly May 2, 2013

Amended in Assembly April 16, 2013

Amended in Assembly March 21, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 1180

Introduced by Assembly Member Pan

February 22, 2013

An act to amend Sections 1363.06, 1363.07, 1366.3, 1366.35, 1373.6, 1373.621, 1373.622, 1399.805, 1399.810, 1399.811, and 1399.815 of, and to add Section 1373.620 to, the Health and Safety Code, and to amend Sections 10116.5, 10127.14, 10127.16, 10127.18, 10785, 10901.3, 10901.8, 10901.9, 10902.3, 12672, and 12682.1 of, to add Section 12682.2 to, and to repeal Section 10902.6 of, the Insurance Code, relating to health care coverage, and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

AB 1180, as amended, Pan. Health care coverage: federally eligible defined individuals: conversion or continuation of coverage.

(1) Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law also provides for the regulation of health insurers by the Insurance Commissioner. Existing law requires a health care service plan or a health insurer offering individual plan contracts or individual insurance policies to fairly and affirmatively offer, market, and sell certain individual contracts and policies to all federally eligible defined individuals, as defined, in each service area in which the plan or insurer provides or arranges for the provision of health care services. Existing law prohibits the premium for those policies and contracts from exceeding the premium paid by a subscriber of the California Major Risk Medical Insurance Program who is of the same age and resides in the same geographic region as the federally eligible defined individual, as specified.

This bill would make these provisions of law applicable only to individual grandfathered health plans, as defined, previously issued to federally eligible defined individuals, unless and until specified provisions of the federal Patient Protection and Affordable Care Act (PPACA) are amended or repealed, as specified. The bill would also require a health care service plan or an insurer, at least 60 days prior to the plan or policy renewal date, to issue prescribed notifications to a person who is enrolled in an individual health benefit plan or individual health insurance policy that is not a grandfathered health plan. The bill would also impose the notification requirement for individuals who are covered under the California Major Risk Medical Insurance Program. Because a willful violation of this requirement by a health care service plan would be a crime, the bill would impose a state-mandated local program.

(2) Existing law establishes a formula establishing the upper limit for premium charges for health care plans and health insurance. Existing law authorizes the plan and insurer to adjust the premium based on family size, as specified.

This bill, after January 1, 2014, and until January 1, 2020, instead of the current formula, would limit the premium charged for coverage provided in 2014 to the rate charged in 2013 multiplied by 1.09 and would limit the rate of growth thereafter, as specified.

(3) Existing law requires a health care service plan or health insurer to offer continuation or conversion of individual or group coverage for a specified period of time and under certain circumstances.

The bill would make those provisions inoperative, unless and until specified provisions of PPACA are amended or repealed, as specified, and would make conforming changes.

begin insert

(4) This bill would incorporate additional changes to Section 10785 of the Insurance Code proposed by AB 1391, that would become operative only if AB 1391 and this bill are both chaptered and become effective on or before January 1, 2014, and this bill is chaptered last.

end insert begin delete

(4)

end delete

begin insert (5) end insert  The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

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

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

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

SECTION 1.  

Section 1363.06 of the Health and Safety Code
is amended to read:

1363.06.  

(a) The Department of Managed Health Care and the
Department of Insurance shall compile information as required by
this section and Section 10127.14 of the Insurance Code into two
comparative benefit matrices. The first matrix shall compare benefit
packages offered pursuant to Section 1373.62 and Section 10127.15
of the Insurance Code. The second matrix shall compare benefit
packages offered pursuant to Sections 1366.35, 1373.6, and
1399.804 and Sections 10785, 10901.2, and 12682.1 of the
Insurance Code.

(b) The comparative benefit matrix shall include:

(1) Benefit information submitted by health care service plans
pursuant to subdivision (d) and by health insurers pursuant to
Section 10127.14 of the Insurance Code.

(2) The following statements in at least 12-point type at the top
of the matrix:

(A) “This benefit summary is intended to help you compare
coverage and benefits and is a summary only. For a more detailed
description of coverage, benefits, and limitations, please contact
the health care service plan or health insurer.”

(B) “The comparative benefit summary is updated annually, or
more often if necessary to be accurate.”

(C) “The most current version of this comparative benefit
summary is available on (address of the plan’s or insurer’s Internet
Web site).”

This subparagraph applies only to those plans or insurers that
maintain an Internet Web site.

(3) The telephone number or numbers that may be used by an
applicant to contact either the department or the Department of
Insurance, as appropriate, for further assistance.

(c) The Department of Managed Health Care and the Department
of Insurance shall jointly prepare two standardized templates for
use by health care service plans and health insurers in submitting
the information required pursuant to subdivision (d) and
subdivision (d) of Section 10127.14 of the Insurance Code. The
templates shall be exempt from the provisions of Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code.

(d) Health care service plans, except specialized health care
service plans, shall submit the following to the department by
January 31, 2003, and annually thereafter:

(1) A summary explanation of the following for each product
described in subdivision (a).

(A) Eligibility requirements.

(B) The full premium cost of each benefit package in the service
area in which the individual and eligible dependents work or reside.

(C) When and under what circumstances benefits cease.

(D) The terms under which coverage may be renewed.

(E) Other coverage that may be available if benefits under the
described benefit package cease.

(F) The circumstances under which choice in the selection of
physicians and providers is permitted.

(G) Lifetime and annual maximums.

(H) Deductibles.

(2) A summary explanation of coverage for the following,
together with the corresponding copayments and limitations, for
each product described in subdivision (a):

(A) Professional services.

(B) Outpatient services.

(C) Hospitalization services.

(D) Emergency health coverage.

(E) Ambulance services.

(F) Prescription drug coverage.

(G) Durable medical equipment.

(H) Mental health services.

(I) Residential treatment.

(J) Chemical dependency services.

(K) Home health services.

(L) Custodial care and skilled nursing facilities.

(3) The telephone number or numbers that may be used by an
applicant to access a health care service plan customer service
representative and to request additional information about the plan
contract.

(4) Any other information specified by the department in the
template.

(e) Each health care service plan shall provide the department
with updates to the information required by subdivision (d) at least
annually, or more often if necessary to maintain the accuracy of
the information.

(f) The department and the Department of Insurance shall make
the comparative benefit matrices available on their respective
Internet Web sites and to the health care service plans and health
insurers for dissemination as required by Section 1373.6 and
Section 12682.1 of the Insurance Code, after confirming the
accuracy of the description of the matrices with the health care
service plans and health insurers.

(g) As used in this section and Section 1363.07, “benefit matrix”
shall have the same meaning as benefit summary.

(h) (1) This section shall be inoperative on January 1, 2014.

(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-91), this
section shall become operative on the date of that repeal or
amendment.

(3) For purposes of this subdivision, “PPACA” means the federal
Patient Protection and Affordable Care Act (Public Law 111-148),
as amended by the federal Health Care Education and
Reconciliation Act of 2010 (Public Law 111-152), and any rules,
regulations, or guidance issued pursuant to that law.

SEC. 2.  

Section 1363.07 of the Health and Safety Code is
amended to read:

1363.07.  

(a) Each health care service plan shall send copies
of the comparative benefit matrix prepared pursuant to Section
1363.06 on an annual basis, or more frequently as the matrix is
updated by the department and the Department of Insurance, to
solicitors and solicitor firms and employers with whom the plan
contracts.

(b) Each health care service plan shall require its representatives
and solicitors and soliciting firms with which it contracts, to
provide a copy of the comparative benefit matrix to individuals
when presenting any benefit package for examination or sale.

(c) Each health care service plan that maintains an Internet Web
site shall make a downloadable copy of the comparative benefit
matrix described in Section 1363.06 available through a link on
its site to the Internet Web sites of the department and the
Department of Insurance.

(d) (1) This section shall be inoperative on January 1, 2014.

(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-91), this
section shall become operative on the date of that repeal or
amendment.

(3) For purposes of this subdivision, “PPACA” means the federal
Patient Protection and Affordable Care Act (Public Law 111-148),
as amended by the federal Health Care Education and
Reconciliation Act of 2010 (Public Law 111-152), and any rules,
regulations, or guidance issued pursuant to that law.

SEC. 3.  

Section 1366.3 of the Health and Safety Code is
amended to read:

1366.3.  

(a) On and after January 1, 2005, a health care service
plan issuing individual plan contracts that ceases to offer individual
coverage in this state shall offer coverage to the subscribers who
had been covered by those contracts at the time of withdrawal
under the same terms and conditions as provided in paragraph (3)
of subdivision (a), paragraphs (2) to (4), inclusive, of subdivision
(b), subdivisions (c) to (e), inclusive, and subdivision (h) of Section
1373.6.

(b) A health care service plan that ceases to offer individual
coverage in a service area shall offer the coverage required by
subdivision (a) to subscribers who had been covered by those
contracts at the time of withdrawal, if the plan continues to offer
group coverage in that service area. This subdivision shall not
apply to coverage provided pursuant to a preferred provider
organization.

(c) The department may adopt regulations to implement this
section.

(d) This section shall not apply when a plan participating in
Medi-Cal, Healthy Families, Access for Infants and Mothers, or
any other contract between the plan and a government entity no
longer contracts with the government entity to provide health
coverage in the state, or a specified area of the state, nor shall this
section apply when a plan ceases entirely to market, offer, and
issue any and all forms of coverage in any part of this state after
the effective date of this section.

(e) (1) On and after January 1, 2014, and except as provided
in paragraph (2), the reference to Section 1373.6 in subdivision
(a) shall not apply to any health plan contracts.

(2) If Section 5000A of the Internal Revenue Code, as added
by Section 1501 of 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), 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. Section 300gg-91), paragraph (1)
shall become inoperative on the date of that repeal or amendment.

SEC. 4.  

Section 1366.35 of the Health and Safety Code is
amended to read:

1366.35.  

(a) A health care service plan providing coverage
for hospital, medical, or surgical benefits under an individual health
care service plan contract may not, with respect to a federally
eligible defined individual desiring to enroll in individual health
insurance coverage, decline to offer coverage to, or deny enrollment
of, the individual or impose any preexisting condition exclusion
with respect to the coverage.

(b) For purposes of this section, “federally eligible defined
individual” means an individual who, as of the date on which the
individual seeks coverage under this section, meets all of the
following conditions:

(1) Has had 18 or more months of creditable coverage, and
whose most recent prior creditable coverage was under a group
health plan, a federal governmental plan maintained for federal
employees, or a governmental plan or church plan as defined in
the federal Employee Retirement Income Security Act of 1974
(29 U.S.C. Sec. 1002).

(2) Is not eligible for coverage under a group health plan,
Medicare, or Medi-Cal, and does not have other health insurance
coverage.

(3) Was not terminated from his or her most recent creditable
coverage due to nonpayment of premiums or fraud.

(4) If offered continuation coverage under COBRA or
Cal-COBRA, has elected and exhausted that coverage.

(c) Every health care service plan shall comply with applicable
federal statutes and regulations regarding the provision of coverage
to federally eligible defined individuals, including any relevant
application periods.

(d) A health care service plan shall offer the following health
benefit plan contracts under this section that are designed for, made
generally available to, are actively marketed to, and enroll,
individuals: (1) either the two most popular products as defined
in Section 300gg-41(c)(2) of Title 42 of the United States Code
and Section 148.120(c)(2) of Title 45 of the Code of Federal
Regulations or (2) the two most representative products as defined
in Section 300gg-41(c)(3) of the United States Code and Section
148.120(c)(3) of Title 45 of the Code of Federal Regulations, as
determined by the plan in compliance with federal law. A health
care service plan that offers only one health benefit plan contract
to individuals, excluding health benefit plans offered to Medi-Cal
or Medicare beneficiaries, shall be deemed to be in compliance
with this article if it offers that health benefit plan contract to
federally eligible defined individuals in a manner consistent with
this article.

(e) (1)  In the case of a health care service plan that offers health
insurance coverage in the individual market through a network
plan, the plan may do both of the following:

(A) Limit the individuals who may be enrolled under that
coverage to those who live, reside, or work within the service area
for the network plan.

(B) Within the service area of the plan, deny coverage to
individuals if the plan has demonstrated to the director that the
plan will not have the capacity to deliver services adequately to
additional individual enrollees because of its obligations to existing
group contractholders and enrollees and individual enrollees, and
that the plan is applying this paragraph uniformly to individuals
without regard to any health status-related factor of the individuals
and without regard to whether the individuals are federally eligible
defined individuals.

(2) A health care service plan, upon denying health insurance
coverage in any service area in accordance with subparagraph (B)
of paragraph (1), may not offer coverage in the individual market
within that service area for a period of 180 days after the coverage
is denied.

(f) (1) A health care service plan may deny health insurance
coverage in the individual market to a federally eligible defined
individual if the plan has demonstrated to the director both of the
following:

(A) The plan does not have the financial reserves necessary to
underwrite additional coverage.

(B) The plan is applying this subdivision uniformly to all
individuals in the individual market and without regard to any
health status-related factor of the individuals and without regard
to whether the individuals are federally eligible defined individuals.

(2) A health care service plan, upon denying individual health
insurance coverage in any service area in accordance with
paragraph (1), may not offer that coverage in the individual market
within that service area for a period of 180 days after the date the
coverage is denied or until the issuer has demonstrated to the
director that the plan has sufficient financial reserves to underwrite
additional coverage, whichever is later.

(g) The requirement pursuant to federal law to furnish a
certificate of creditable coverage shall apply to health insurance
coverage offered by a health care service plan in the individual
market in the same manner as it applies to a health care service
plan in connection with a group health benefit plan.

(h) A health care service plan shall compensate a life agent or
fire and casualty broker-agent whose activities result in the
enrollment of federally eligible defined individuals in the same
manner and consistent with the renewal commission amounts as
the plan compensates life agents or fire and casualty broker-agents
for other enrollees who are not federally eligible defined
individuals and who are purchasing the same individual health
benefit plan contract.

(i) Every health care service plan shall disclose as part of its
COBRA or Cal-COBRA disclosure and enrollment documents,
an explanation of the availability of guaranteed access to coverage
under the Health Insurance Portability and Accountability Act of
1996, including the necessity to enroll in and exhaust COBRA or
Cal-COBRA benefits in order to become a federally eligible
defined individual.

(j) No health care service plan may request documentation as
to whether or not a person is a federally eligible defined individual
other than is permitted under applicable federal law or regulations.

(k) This section shall not apply to coverage defined as excepted
benefits pursuant to Section 300gg(c) of Title 42 of the United
States Code.

(l) This section shall apply to health care service plan contracts
offered, delivered, amended, or renewed on or after January 1,
2001.

(m) (1) This section shall be inoperative on January 1, 2014.

(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. Section 300gg-91),
this section shall become operative on the date of that repeal or
amendment.

(3) For purposes of this subdivision, “PPACA” means the federal
Patient Protection and Affordable Care Act (Public Law 111-148),
as amended by the federal Health Care Education and
Reconciliation Act of 2010 (Public Law 111-152), and any rules,
regulations, or guidance issued pursuant to that law.

SEC. 5.  

Section 1373.6 of the Health and Safety Code is
amended to read:

1373.6.  

This section does not apply to a specialized health care
service plan contract or to a plan contract that primarily or solely
supplements Medicare. The director may adopt rules consistent
with federal law to govern the discontinuance and replacement of
plan contracts that primarily or solely supplement Medicare.

(a) (1) Every group contract entered into, amended, or renewed
on or after September 1, 2003, that provides hospital, medical, or
surgical expense benefits for employees or members shall provide
that an employee or member whose coverage under the group
contract has been terminated by the employer shall be entitled to
convert to nongroup membership, without evidence of insurability,
subject to the terms and conditions of this section.

(2) If the health care service plan provides coverage under an
individual health care service plan contract, other than conversion
coverage under this section, it shall offer one of the two plans that
it is required to offer to a federally eligible defined individual
pursuant to Section 1366.35. The plan shall provide this coverage
at the same rate established under Section 1399.805 for a federally
eligible defined individual. A health care service plan that is
federally qualified under the federal Health Maintenance
Organization Act (42 U.S.C. Sec. 300e et seq.) may charge a rate
for the coverage that is consistent with the provisions of that act.

(3) If the health care service plan does not provide coverage
under an individual health care service plan contract, it shall offer
a health benefit plan contract that is the same as a health benefit
contract offered to a federally eligible defined individual pursuant
to Section 1366.35. The health care service plan may offer either
the most popular health maintenance organization model plan or
the most popular preferred provider organization plan, each of
which has the greatest number of enrolled individuals for its type
of plan as of January 1 of the prior year, as reported by plans that
provide coverage under an individual health care service plan
contract to the department or the Department of Insurance by
January 31, 2003, and annually thereafter. A health care service
plan subject to this paragraph shall provide this coverage with the
same cost-sharing terms and at the same premium as a health care
service plan providing coverage to that individual under an
individual health care service plan contract pursuant to Section
1399.805. The health care service plan shall file the health benefit
plan it will offer, including the premium it will charge and the
cost-sharing terms of the plan, with the Department of Managed
Health Care.

(b) A conversion contract shall not be required to be made
available to an employee or member if termination of his or her
coverage under the group contract occurred for any of the following
reasons:

(1) The group contract terminated or an employer’s participation
terminated and the group contract is replaced by similar coverage
under another group contract within 15 days of the date of
termination of the group coverage or the subscriber’s participation.

(2) The employee or member failed to pay amounts due the
health care service plan.

(3) The employee or member was terminated by the health care
service plan from the plan for good cause.

(4) The employee or member knowingly furnished incorrect
information or otherwise improperly obtained the benefits of the
plan.

(5) The employer’s hospital, medical, or surgical expense benefit
program is self-insured.

(c) A conversion contract is not required to be issued to any
person if any of the following facts are present:

(1) The person is covered by or is eligible for benefits under
Title XVIII of the United States Social Security Act.

(2) The person is covered by or is eligible for hospital, medical,
or surgical benefits under any arrangement of coverage for
individuals in a group, whether insured or self-insured.

(3) The person is covered for similar benefits by an individual
policy or contract.

(4) The person has not been continuously covered during the
three-month period immediately preceding that person’s
termination of coverage.

(d) Benefits of a conversion contract shall meet the requirements
for benefits under this chapter.

(e) Unless waived in writing by the plan, written application
and first premium payment for the conversion contract shall be
made not later than 63 days after termination from the group. A
conversion contract shall be issued by the plan which shall be
effective on the day following the termination of coverage under
the group contract if the written application and the first premium
payment for the conversion contract are made to the plan not later
than 63 days after the termination of coverage, unless these
requirements are waived in writing by the plan.

(f) The conversion contract shall cover the employee or member
and his or her dependents who were covered under the group
contract on the date of their termination from the group.

(g) A notification of the availability of the conversion coverage
shall be included in each evidence of coverage. However, it shall
be the sole responsibility of the employer to notify its employees
of the availability, terms, and conditions of the conversion coverage
which responsibility shall be satisfied by notification within 15
days of termination of group coverage. Group coverage shall not
be deemed terminated until the expiration of any continuation of
the group coverage. For purposes of this subdivision, the employer
shall not be deemed the agent of the plan for purposes of
notification of the availability, terms, and conditions of conversion
coverage.

(h) As used in this section, “hospital, medical, or surgical
benefits under state or federal law” do not include benefits under
Chapter 7 (commencing with Section 14000) or Chapter 8
(commencing with Section 14200) of Part 3 of Division 9 of the
Welfare and Institutions Code, or Title XIX of the United States
Social Security Act.

(i) Every group contract entered into, amended, or renewed
before September 1, 2003, shall be subject to the provisions of this
section as it read prior to its amendment by Assembly Bill 1401
of the 2001-02 Regular Session.

(j) (1) On and after January 1, 2014, and except as provided in
paragraph (2), this section shall apply only to individual
grandfathered health plan contracts previously issued pursuant to
this section to federally eligible defined individuals.

(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. Section 300gg-91),
paragraph (1) shall become inoperative on the date of that repeal
or amendment.

(3) For purposes of this subdivision, the following definitions
apply:

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

(B) “PPACA” means the federal Patient Protection and
Affordable Care Act (Public Law 111-148), as amended by the
federal Health Care Education and Reconciliation Act of 2010
(Public Law 111-152), and any rules, regulations, or guidance
issued pursuant to that law.

SEC. 6.  

Section 1373.620 is added to the Health and Safety
Code, to read:

1373.620.  

(a) (1) At least 60 days prior to the plan renewal
date, a health care service plan that does not otherwise issue
individual health care service plan contracts shall issue the notice
described in paragraph (2) to any subscriber enrolled in an
individual health benefit plan contract issued pursuant to Section
1373.6 that is not a grandfathered health plan.

(2) The notice shall be in at least 12-point type and shall include
all of the following:

(A) Notice that, as of the renewal date, the individual plan
contract will not be renewed.

(B) The availability of individual health coverage through
Covered California, including at least all of the following:

(i) That, beginning on January 1, 2014, individuals seeking
coverage may not be denied coverage based on health status.

(ii) That the premium rates for coverage offered by a health care
service plan or a health insurer cannot be based on an individual’s
health status.

(iii) That individuals obtaining coverage through Covered
California may, depending upon income, be eligible for premium
subsidies and cost-sharing subsidies.

(iv) That individuals seeking coverage must obtain this coverage
during an open or special enrollment period, and a description of
the open and special enrollment periods that may apply.

(b) (1) At least 60 days prior to the plan renewal date, a health
care service plan that issues individual health care service plan
contracts shall issue the notice described in paragraph (2) to a
subscriber enrolled in an individual health benefit plan contract
issued pursuant to Section 1366.35 or 1373.6 that is not a
grandfathered health plan.

(2) The notice shall be in at least 12-point type and shall include
all of the following:

(A) Notice that, as of the renewal date, the individual plan
contract will not be renewed.

(B) Information regarding the individual health plan contract
that the health plan will issue as of January 1, 2014, which the
health plan has reasonably concluded is the most comparable to
the individual’s current plan. The notice shall include information
on premiums for the possible replacement plan and instructions
that the individual can continue their coverage by paying the
premium stated by the due date.

(C) Notice of the availability of other individual health coverage
through Covered California, including at least all of the following:

(i) That, beginning on January 1, 2014, individuals seeking
coverage may not be denied coverage based on health status.

(ii) That the premium rates for coverage offered by a health care
service plan or a health insurer cannot be based on an individual’s
health status.

(iii) That individuals obtaining coverage through Covered
California may, depending upon income, be eligible for premium
subsidies and cost-sharing subsidies.

(iv) That individuals seeking coverage must obtain this coverage
during an open or special enrollment period, and a description of
the open and special enrollment periods that may apply.

(c) No later than September 1, 2013, the department, in
consultation with the Department of Insurance, shall adopt uniform
model notices that health plans shall use to comply with
subdivisions (a) and (b) and Sections 1366.50, 1373.622, and
1399.861. Use of the model notices shall not require prior approval
by the department. The model notices adopted 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). The director may modify the wording of these model notices
specifically for the purposes of clarity, readability, and accuracy.

(d) The notices required in this section are vital documents,
pursuant to clause (iii) of subparagraph (B) of paragraph (1) of
subdivision (b) of Section 1367.04, and shall be subject to the
applicable requirements of that section.

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

(1) “Covered California” means the California Health Benefit
Exchange established pursuant to Section 100500 of the
Government Code.

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

(3) “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.

SEC. 7.  

Section 1373.621 of the Health and Safety Code is
amended to read:

1373.621.  

(a) Except for a specialized health care service plan,
every health care service plan contract that is issued, amended,
delivered, or renewed in this state on or after January 1, 1999, that
provides hospital, medical, or surgical expense coverage under an
employer-sponsored group plan for an employer subject to
COBRA, as defined in subdivision (e), or an employer group for
which the plan is required to offer Cal-COBRA coverage, as
defined in subdivision (f), including a carrier providing replacement
coverage under Section 1399.63, shall further offer the former
employee the opportunity to continue benefits as required under
subdivision (b), and shall further offer the former spouse of an
employee or former employee the opportunity to continue benefits
as required under subdivision (c).

(b) (1) In the event a former employee who worked for the
employer for at least five years prior to the date of termination of
employment and who is 60 years of age or older on the date
employment ends is entitled to and so elects to continue benefits
under COBRA or Cal-COBRA for himself or herself and for any
spouse, the employee or spouse may further continue benefits
beyond the date coverage under COBRA or Cal-COBRA ends, as
set forth in paragraph (2). Except as otherwise specified,
continuation coverage shall be under the same benefit terms and
conditions as if the continuation coverage under COBRA or
Cal-COBRA had remained in force. For the employee or spouse,
continuation coverage following the end of COBRA or
Cal-COBRA is subject to payment of premiums to the health care
service plan. Individuals ineligible for COBRA or Cal-COBRA,
or who are eligible but have not elected or exhausted continuation
coverage under federal COBRA or Cal-COBRA, are not entitled
to continuation coverage under this section. Premiums for
continuation coverage under this section shall be billed by, and
remitted to, the health care service plan in accordance with
subdivision (d). Failure to pay the requisite premiums may result
in termination of the continuation coverage in accordance with the
applicable provisions in the plan’s group subscriber agreement
with the former employer.

(2) The employer shall notify the former employee or spouse
or both, or the former spouse of the employee or former employee,
of the availability of the continuation benefits under this section
in accordance with Section 2800.2 of the Labor Code. To continue
health care coverage pursuant to this section, the individual shall
elect to do so by notifying the plan in writing within 30 calendar
days prior to the date continuation coverage under COBRA or
Cal-COBRA is scheduled to end. Every health care service plan
and specialized health care service plan shall provide to the
employer replacing a health care service plan contract issued by
the plan, or to the employer’s agent or broker representative, within
15 days of any written request, information in possession of the
plan reasonably required to administer the requirements of Section
2800.2 of the Labor Code.

(3) The continuation coverage shall end automatically on the
earlier of (A) the date the individual reaches age 65, (B) the date
the individual is covered under any group health plan not
maintained by the employer or any other health plan, regardless
of whether that coverage is less valuable, (C) the date the individual
becomes entitled to Medicare under Title XVIII of the Social
Security Act, (D) for a spouse, five years from the date on which
continuation coverage under COBRA or Cal-COBRA was
scheduled to end for the spouse, or (E) the date on which the
employer terminates its group subscriber agreement with the health
care service plan and ceases to provide coverage for any active
employees through that plan, in which case the health care service
plan shall notify the former employee or spouse or both of the right
to a conversion plan in accordance with Section 1373.6.

(c) (1) If a former spouse of an employee or former employee
was covered as a qualified beneficiary under COBRA or
Cal-COBRA, the former spouse may further continue benefits
beyond the date coverage under COBRA or Cal-COBRA ends, as
set forth in paragraph (2) of subdivision (b). Except as otherwise
specified in this section, continuation coverage shall be under the
same benefit terms and conditions as if the continuation coverage
under COBRA or Cal-COBRA had remained in force. Continuation
coverage following the end of COBRA or Cal-COBRA is subject
to payment of premiums to the health care service plan. Premiums
for continuation coverage under this section shall be billed by, and
remitted to, the health care service plan in accordance with
subdivision (d). Failure to pay the requisite premiums may result
in termination of the continuation coverage in accordance with the
applicable provisions in the plan’s group subscriber agreement
with the employer or former employer.

(2) The continuation coverage for the former spouse shall end
automatically on the earlier of (A) the date the individual reaches
65 years of age, (B) the date the individual is covered under any
group health plan not maintained by the employer or any other
health plan, regardless of whether that coverage is less valuable,
(C) the date the individual becomes entitled to Medicare under
Title XVIII of the Social Security Act, (D) five years from the date
on which continuation coverage under COBRA or Cal-COBRA
was scheduled to end for the former spouse, or (E) the date on
which the employer or former employer terminates its group
subscriber agreement with the health care service plan and ceases
to provide coverage for any active employees through that plan.

(d) (1) If the premium charged to the employer for a specific
employee or dependent eligible under this section is adjusted for
the age of the specific employee, or eligible dependent, on other
than a composite basis, the rate for continuation coverage under
this section shall not exceed 102 percent of the premium charged
by the plan to the employer for an employee of the same age as
the former employee electing continuation coverage in the case of
an individual who was eligible for COBRA, and 110 percent in
the case of an individual who was eligible for Cal-COBRA. If the
coverage continued is that of a former spouse, the premium charged
shall not exceed 102 percent of the premium charged by the plan
to the employer for an employee of the same age as the former
spouse selecting continuation coverage in the case of an individual
who was eligible for COBRA, and 110 percent in the case of an
individual who was eligible for Cal-COBRA.

(2) If the premium charged to the employer for a specific
employee or dependent eligible under this section is not adjusted
for age of the specific employee, or eligible dependent, then the
rate for continuation coverage under this section shall not exceed
213 percent of the applicable current group rate. For purposes of
this section, the “applicable current group rate” means the total
premiums charged by the health care service plan for coverage for
the group, divided by the relevant number of covered persons.

(3) However, in computing the premiums charged to the specific
employer group, the health care service plan shall not include
consideration of the specific medical care expenditures for
beneficiaries receiving continuation coverage pursuant to this
section.

(e) For purposes of this section, “COBRA” means Section
4980B of Title 26 of the United States Code, Section 1161 et seq.
of Title 29 of the United States Code, and Section 300bb of Title
42 of the United States Code, as added by the Consolidated
Omnibus Budget Reconciliation Act of 1985 (Public Law 99-272),
and as amended.

(f) For purposes of this section, “Cal-COBRA” means the
continuation coverage that must be offered pursuant to Article 4.5
(commencing with Section 1366.20), or Article 1.7 (commencing
with Section 10128.50) of Chapter 1 of Part 2 of Division 2 of the
Insurance Code.

(g) For the purposes of this section, “former spouse” means
either an individual who is divorced from an employee or former
employee or an individual who was married to an employee or
former employee at the time of the death of the employee or former
employee.

(h) Every plan evidence of coverage that is issued, amended,
or renewed after July 1, 1999, shall contain a description of the
provisions and eligibility requirements for the continuation
coverage offered pursuant to this section.

(i) This section does not apply to any individual who is not
eligible for its continuation coverage prior to January 1, 2005.

SEC. 8.  

Section 1373.622 of the Health and Safety Code is
amended to read:

1373.622.  

(a)  (1) After the termination of the pilot program
under Section 1373.62, a health care service plan shall continue
to provide coverage under the same terms and conditions specified
in Section 1376.62 as it existed on January 1, 2007, including the
terms of the standard benefit plan and the subscriber payment
amount, to each individual who was terminated from the program
pursuant to subdivision (f) of Section 12725 of the Insurance Code
during the term of the pilot program and who enrolled or applied
to enroll in a standard benefit plan within 63 days of termination.
The Managed Risk Medical Insurance Board shall continue to pay
the amount described in Section 1376.62 for each of those
individuals. A health care service plan shall not be required to
offer the coverage described in Section 1373.62 after the
termination of the pilot program to individuals not already enrolled
in the program.

(2) Notwithstanding paragraph (1) of this subdivision or Section
1373.62 as it existed on January 1, 2007, the following rules shall
apply:

(A) (i) A health care service plan shall not be obligated to
provide coverage to any individual pursuant to this section on or
after January 1, 2014.

(ii) The Managed Risk Medical Insurance Board shall not be
obligated to provide any payment to any health care service plan
under this section for (I) health care expenses incurred on or after
January 1, 2014, or (II) the standard monthly administrative fee,
as defined in Section 1373.62 as it existed on January 1, 2007, for
any month after December 2013.

(B) Each health care service plan providing coverage pursuant
to this section shall, on or before October 1, 2013, send a notice
to each individual enrolled in a standard benefit plan that is in at
least 12-point type and with, at minimum, the following
information:

(i) Notice as to whether or not the plan will terminate as of
January 1, 2014.

(ii) The availability of individual health coverage, including
through Covered California, including at least all of the following:

(I) That, beginning on January 1, 2014, individuals seeking
coverage may not be denied coverage based on health status.

(II) That the premium rates for coverage offered by a health
care service plan or a health insurer cannot be based on an
individual’s health status.

(III) That individuals obtaining coverage through Covered
California may, depending upon income, be eligible for premium
subsidies and cost-sharing subsidies.

(IV) That individuals seeking coverage must obtain this coverage
during an open or special enrollment period, and a description of
the open and special enrollment periods that may apply.

(C) As a condition of receiving payment for a reporting period
pursuant to this section, a health care service plan shall provide
the Managed Risk Medical Insurance Board with a complete, final
annual reconciliation report by the earlier of December 31, 2014,
or an earlier date as prescribed by Section 1373.62, as it existed
on January 1, 2007, for that reporting period. To the extent that it
receives a complete, final reconciliation report for a reporting
period by the date required pursuant to this subparagraph, the
Managed Risk Medical Insurance Board shall complete
reconciliation with the health care service plan for that reporting
period within six months of receiving the report.

(b)  If the state fails to expend, pursuant to this section, sufficient
funds for the state’s contribution amount to any health care service
plan, the health care service plan may increase the monthly
payments that its subscribers are required to pay for any standard
benefit plan to the amount that the Managed Risk Medical
Insurance Board would charge without a state subsidy for the same
plan issued to the same individual within the program.

(c) The adoption and readoption, by the Managed Risk Medical
Insurance Board, of regulations implementing the amendments to
this section enacted by the legislation adding this subdivision shall
be deemed an emergency and necessary to avoid serious harm to
the public peace, health, safety, or general welfare for purposes of
Sections 11346.1 and 11349.6 of the Government Code, and the
Managed Risk Medical Insurance Board is hereby exempted from
the requirement that it describe facts showing the need for
immediate action and from review by the Office of Administrative
Law.

SEC. 9.  

Section 1399.805 of the Health and Safety Code is
amended to read:

1399.805.  

(a) (1) After the federally eligible defined individual
submits a completed application form for a plan contract, the plan
shall, within 30 days, notify the individual of the individual’s actual
premium charges for that plan contract, unless the plan has
provided notice of the premium charge prior to the application
being filed. In no case shall the premium charged for any health
care service plan contract identified in subdivision (d) of Section
1366.35 exceed the following amounts:

(A) For health care service plan contracts that offer services
through a preferred provider arrangement, the average premium
paid by a subscriber of the Major Risk Medical Insurance Program
who is of the same age and resides in the same geographic area as
the federally eligible defined individual. However, for a federally
eligible defined individual who is between the ages of 60 and 64
years, inclusive, the premium shall not exceed the average premium
paid by a subscriber of the Major Risk Medical Insurance Program
who is 59 years of age and resides in the same geographic area as
the federally eligible defined individual.

(B) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that do not offer services
through a preferred provider arrangement, 170 percent of the
standard premium charged to an individual who is of the same age
and resides in the same geographic area as the federally eligible
defined individual. However, for a federally eligible defined
individual who is between the ages of 60 and 64 years, inclusive,
the premium shall not exceed 170 percent of the standard premium
charged to an individual who is 59 years of age and resides in the
same geographic area as the federally eligible defined individual.
The individual shall have 30 days in which to exercise the right to
buy coverage at the quoted premium rates.

(2) A plan may adjust the premium based on family size, not to
exceed the following amounts:

(A) For health care service plans that offer services through a
preferred provider arrangement, the average of the Major Risk
Medical Insurance Program rate for families of the same size that
reside in the same geographic area as the federally eligible defined
individual.

(B) For health care service plans identified in subdivision (d)
of Section 1366.35 that do not offer services through a preferred
provider arrangement, 170 percent of the standard premium charged
to a family that is of the same size and resides in the same
geographic area as the federally eligible defined individual.

(3) This subdivision shall begin delete became end delete begin insert become end insert inoperative on January
1, 2014. This subdivision shall become operative on January 1,
2020.

(b) (1) After the federally eligible defined individual submits
a completed application form for a plan contract, the plan shall,
within 30 days, notify the individual of the individual’s actual
premium charges for that plan contract, unless the plan has
provided notice of the premium charge prior to the application
being filed. In no case shall the premium charged for any health
care service plan contract identified in subdivision (d) of Section
1366.35 exceed the following amounts:

(A) With respect to the rate charged for coverage provided in
2014, the rate charged in 2013 for that coverage multiplied by
1.09.

(B) With respect to the rate charged for coverage provided in
2015 and each subsequent year, the rate charged in the prior year
multiplied by a factor of one plus the percentage change in the
statewide average premium for the second lowest cost silver plan
offered on the Exchange. The Exchange shall determine the
percentage change in the statewide average premium for the second
lowest cost silver plan by subtracting clause (i) from clause (ii)
and dividing the result by clause (i).

(i) The average of the premiums charged in the year prior to the
applicable year for the second lowest cost silver plan in all 19
rating regions, with the premium for each region weighted based
on the region’s relative share of the Exchange’s total individual
enrollment according to the latest data available to the Exchange.

(ii) The average of the premiums to be charged in the applicable
year for the second lowest cost silver plan in all 19 rating regions,
with the premium for each region weighted based on the region’s
relative share of the Exchange’s total individual enrollment
according to the latest data available to the Exchange.

(C) The Exchange shall determine the percentage change in the
statewide average premium no later than 30 days after the
Exchange’s rates for individual coverage for the applicable year
have been finalized.

(2) For purposes of this subdivision, “Exchange” means the
California Health Benefit Exchange established pursuant to Section
100500 of the Government Code.

(3) This subdivision shall become operative on January 1, 2014.
This subdivision shall begin delete became end delete begin insert become end insert inoperative on January 1,
2020.

(c) When a federally eligible defined 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 shall begin no later
than the first day of the following month. When that payment is
neither delivered or 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.

(d) During the first 30 days after the effective date of the plan
contract, the individual shall have the option of changing coverage
to a different plan contract offered by the same health care service
plan. If the individual notified the plan of the change within the
first 15 days of a month, coverage under the new plan contract
shall become effective no later than the first day of the following
month. If an enrolled individual notified the plan of the change
after the 15th day of a month, coverage under the new plan contract
shall become effective no later than the first day of the second
month following notification.

(e) (1) On and after January 1, 2014, and except as provided
in paragraph (2), this section shall apply only to individual
grandfathered health plan contracts previously issued pursuant to
this section to federally eligible defined individuals.

(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. Section 300gg-91),
paragraph (1) shall become inoperative on the date of that repeal
or amendment and this section shall apply to health care service
plan contracts issued, amended, or renewed on or after that date.

(3) For purposes of this subdivision, the following definitions
apply:

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

(B) “PPACA” means the federal Patient Protection and
Affordable Care Act (Public Law 111-148), as amended by the
federal Health Care Education and Reconciliation Act of 2010
(Public Law 111-152), and any rules, regulations, or guidance
issued pursuant to that law.

SEC. 10.  

Section 1399.810 of the Health and Safety Code is
amended to read:

1399.810.  

All health care service plan contracts offered to a
federally eligible defined individual shall be renewable with respect
to the individual and dependents at the option of the contractholder
except in cases of:

(a) Nonpayment of the required premiums.

(b) Fraud or misrepresentation by the contractholder.

(c) The plan ceases to provide or arrange for the provision of
health care services for individual health care service plan contracts
in this state, provided, however, that the following conditions are
satisfied:

(1) Notice of the decision to cease new or existing individual
health benefit plans in this state is provided to the director and to
the contractholder.

(2) Individual health care service plan contracts subject to this
chapter shall not be canceled for 180 days after the date of the
notice required under paragraph (1) and for that business of a plan
that remains in force, any plan that ceases to offer for sale new
individual health care service plan contracts shall continue to be
governed by this article with respect to business conducted under
this article.

(3) A plan that ceases to write new individual business in this
state after January 1, 2001, shall be prohibited from offering for
sale new individual health care service plan contracts in this state
for a period of three years from the date of the notice to the director.

(d) When the plan withdraws a health care service plan contract
from the individual market, provided that the plan makes available
to eligible individuals all plan contracts that it makes available to
new individual business, and provided that the premium for the
new plan contract complies with the renewal increase requirements
set forth in Section 1399.811.

(e) (1) On and after January 1, 2014, and except as provided
in paragraph (2), this section shall apply only to individual
grandfathered health plan contracts previously issued pursuant to
this section to federally eligible defined individuals.

(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. Section 300gg-91),
paragraph (1) shall become inoperative on the date of that repeal
or amendment and this section shall apply to health care service
plan contracts issued, amended, or renewed on or after that date.

(3) For purposes of this subdivision, the following definitions
apply:

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

(B) “PPACA” means the federal Patient Protection and
Affordable Care Act (Public Law 111-148), as amended by the
federal Health Care Education and Reconciliation Act of 2010
(Public Law 111-152), and any rules, regulations, or guidance
issued pursuant to that law.

SEC. 11.  

Section 1399.811 of the Health and Safety Code is
amended to read:

1399.811.  

(a) (1) Premiums for contracts offered, delivered,
amended, or renewed by plans on or after January 1, 2001, shall
be subject to the following requirements:

(A) The premium for new business for a federally eligible
defined individual shall not exceed the following amounts:

(i) For health care service plan contracts identified in subdivision
(d) of Section 1366.35 that offer services through a preferred
provider arrangement, the average premium paid by a subscriber
of the Major Risk Medical Insurance Program who is of the same
age and resides in the same geographic area as the federally eligible
defined individual. However, for federally eligible defined
individuals who are between the ages of 60 to 64 years, inclusive,
the premium shall not exceed the average premium paid by a
subscriber of the Major Risk Medical Insurance Program who is
59 years of age and resides in the same geographic area as the
federally eligible defined individual.

(ii) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that do not offer services
through a preferred provider arrangement, 170 percent of the
standard premium charged to an individual who is of the same age
and resides in the same geographic area as the federally eligible
defined individual. However, for federally eligible defined
individuals who are between the ages of 60 to 64 years, inclusive,
the premium shall not exceed 170 percent of the standard premium
charged to an individual who is 59 years of age and resides in the
same geographic area as the federally eligible defined individual.

(B) The premium for in force business for a federally eligible
defined individual shall not exceed the following amounts:

(i) For health care service plan contracts identified in subdivision
(d) of Section 1366.35 that offer services through a preferred
provider arrangement, the average premium paid by a subscriber
of the Major Risk Medical Insurance Program who is of the same
age and resides in the same geographic area as the federally eligible
defined individual. However, for federally eligible defined
individuals who are between the ages of 60 and 64 years, inclusive,
the premium shall not exceed the average premium paid by a
subscriber of the Major Risk Medical Insurance Program who is
59 years of age and resides in the same geographic area as the
federally eligible defined individual.

(ii) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that do not offer services
through a preferred provider arrangement, 170 percent of the
standard premium charged to an individual who is of the same age
and resides in the same geographic area as the federally eligible
defined individual. However, for federally eligible defined
individuals who are between the ages of 60 and 64 years, inclusive,
the premium shall not exceed 170 percent of the standard premium
charged to an individual who is 59 years of age and resides in the
same geographic area as the federally eligible defined individual.
The premium effective on January 1, 2001, shall apply to in force
business at the earlier of either the time of renewal or July 1, 2001.

(2) This subdivision shall begin delete became end delete begin insert become end insert inoperative on January
1, 2014. This subdivision shall become operative on January 1,
2020.

(b) (1) Premiums for contracts offered, delivered, amended, or
renewed by plans on or after January 1, 2014, shall be subject to
the following requirements:

(A) With respect to the rate charged for coverage provided in
2014, the rate charged in 2013 for that coverage multiplied by
1.09.

(B) With respect to the rate charged for coverage provided in
2015 and each subsequent year, the rate charged in the prior year
multiplied by a factor of one plus the percentage change in the
statewide average premium for the second lowest cost silver plan
offered on the Exchange. The Exchange shall determine the
percentage change in the statewide average premium for the second
lowest cost silver plan by subtracting clause (i) from clause (ii)
and dividing the result by clause (i).

(i) The average of the premiums charged in the year prior to the
applicable year for the second lowest cost silver plan in all 19
rating regions, with the premium for each region weighted based
on the region’s relative share of the Exchange’s total individual
enrollment according to the latest data available to the Exchange.

(ii) The average of the premiums to be charged in the applicable
year for the second lowest cost silver plan in all 19 rating regions,
with the premium for each region weighted based on the region’s
relative share of the Exchange’s total individual enrollment
according to the latest data available to the Exchange.

(C) The Exchange shall determine the percentage change in the
statewide average premium no later than 30 days after the
Exchange’s rates for individual coverage for the applicable year
have been finalized.

(2) For purposes of this subdivision, “Exchange” means the
California Health Benefit Exchange established pursuant to Section
100500 of the Government Code.

(3) This subdivision shall become operative on January 1, 2014.
This subdivision shall begin delete became end delete begin insert become end insert inoperative on January 1,
2020.

(c) The premium applied to a federally eligible defined
individual may not increase by more than the following amounts:

(1) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that offer services through a
preferred provider arrangement, the average increase in the
premiums charged to a subscriber of the Major Risk Medical
Insurance Program who is of the same age and resides in the same
geographic area as the federally eligible defined individual.

(2) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that do not offer services
through a preferred provider arrangement, the increase in premiums
charged to a nonfederally eligible defined individual who is of the
same age and resides in the same geographic area as the federally
begin delete defined end delete eligible begin insert defined end insert individual. The premium for an eligible
individual may not be modified more frequently than every 12
months.

(3) For a contract that a plan has discontinued offering, the
premium applied to the first rating period of the new contract that
the federally eligible defined individual elects to purchase shall
be no greater than the premium applied in the prior rating period
to the discontinued contract.

(d) (1) On and after January 1, 2014, and except as provided
in paragraph (2), this section shall apply only to individual
grandfathered health plan contracts previously issued pursuant to
this section to federally eligible defined individuals.

(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. Section 300gg-91),
paragraph (1) shall become inoperative on the date of that repeal
or amendment and this section shall apply to health care service
plan contracts issued, amended, or renewed on or after that date.

(3) For purposes of this subdivision, the following definitions
apply:

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

(B) “PPACA” means the federal Patient Protection and
Affordable Care Act (Public Law 111-148), as amended by the
federal Health Care Education and Reconciliation Act of 2010
(Public Law 111-152), and any rules, regulations, or guidance
issued pursuant to that law.

SEC. 12.  

Section 1399.815 of the Health and Safety Code is
amended to read:

1399.815.  

(a) At least 20 business days prior to renewing or
amending a plan contract subject to this article, or at least 20
business days prior to the initial offering of a plan contract subject
to this article, a plan shall file a notice of an amendment with the
director in accordance with the provisions of Section 1352. The
notice of an amendment shall include a statement certifying that
the plan is in compliance with subdivision (a) of Section 1399.805
and with Section 1399.811. Any action by the director, as permitted
under Section 1352, to disapprove, suspend, or postpone the plan’s
use of a plan contract shall be in writing, specifying the reasons
the plan contract does not comply with the requirements of this
chapter.

(b) Prior to making any changes in the premium, the plan shall
file an amendment in accordance with the provisions of Section
1352, and shall include a statement certifying the plan is in
compliance with subdivision (a) of Section 1399.805 and with
Section 1399.811. All other changes to a plan contract previously
filed with the director pursuant to subdivision (a) shall be filed as
an amendment in accordance with the provisions of Section 1352,
unless the change otherwise would require the filing of a material
modification.

(c) (1) On and after January 1, 2014, and except as provided
in paragraph (2), this section shall apply only to individual
grandfathered health plan contracts previously issued pursuant to
this section to federally eligible defined individuals.

(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. Section 300gg-91),
paragraph (1) shall become inoperative on the date of that repeal
or amendment and this section shall apply to plan contracts issued,
amended, or renewed on or after that date.

(3) For purposes of this subdivision, the following definitions
apply:

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

(B) “PPACA” means the federal Patient Protection and
Affordable Care Act (Public Law 111-148), as amended by the
federal Health Care Education and Reconciliation Act of 2010
(Public Law 111-152), and any rules, regulations, or guidance
issued pursuant to that law.

SEC. 13.  

Section 10116.5 of the Insurance Code is amended
to read:

10116.5.  

(a) Every policy of disability insurance that is issued,
amended, delivered, or renewed in this state on or after January
1, 1999, that provides hospital, medical, or surgical expense
coverage under an employer-sponsored group plan for an employer
subject to COBRA, as defined in subdivision (e), or an employer
group for which the disability insurer is required to offer
Cal-COBRA coverage, as defined in subdivision (f), including a
carrier providing replacement coverage under Section 10128.3,
shall further offer the former employee the opportunity to continue
benefits as required under subdivision (b), and shall further offer
the former spouse of an employee or former employee the
opportunity to continue benefits as required under subdivision (c).

(b) (1) If a former employee worked for the employer for at
least five years prior to the date of termination of employment and
is 60 years of age or older on the date employment ends is entitled
to and so elects to continue benefits under COBRA or Cal-COBRA
for himself or herself and for any spouse, the employee or spouse
may further continue benefits beyond the date coverage under
COBRA or Cal-COBRA ends, as set forth in paragraph (2). Except
as otherwise specified in this section, continuation coverage shall
be under the same benefit terms and conditions as if the
continuation coverage under COBRA or Cal-COBRA had remained
in force. For the employee or spouse, continuation coverage
following the end of COBRA or Cal-COBRA is subject to payment
of premiums to the insurer. Individuals ineligible for COBRA or
Cal-COBRA or who are eligible but have not elected or exhausted
continuation coverage under federal COBRA or Cal-COBRA are
not entitled to continuation coverage under this section. Premiums
for continuation coverage under this section shall be billed by, and
remitted to, the insurer in accordance with subdivision (d). Failure
to pay the requisite premiums may result in termination of the
continuation coverage in accordance with the applicable provisions
in the insurer’s group contract with the employer.

(2) The employer shall notify the former employee or spouse
or both, or the former spouse of the employee or former employee,
of the availability of the continuation benefits under this section
in accordance with Section 2800.2 of the Labor Code. To continue
health care coverage pursuant to this section, the individual shall
elect to do so by notifying the insurer in writing within 30 calendar
days prior to the date continuation coverage under COBRA or
Cal-COBRA is scheduled to end. Every disability insurer shall
provide to the employer replacing a group benefit plan policy
issued by the insurer, or to the employer’s agent or broker
representative, within 15 days of any written request, information
in possession of the insurer reasonably required to administer the
requirements of Section 2800.2 of the Labor Code.

(3) The continuation coverage shall end automatically on the
earlier of (A) the date the individual reaches age 65, (B) the date
the individual is covered under any group health plan not
maintained by the employer or any other insurer or health care
service plan, regardless of whether that coverage is less valuable,
(C) the date the individual becomes entitled to Medicare under
Title XVIII of the Social Security Act, (D) for a spouse, five years
from the date on which continuation coverage under COBRA or
Cal-COBRA was scheduled to end for the spouse, or (E) the date
on which the employer terminates its group contract with the
insurer and ceases to provide coverage for any active employees
through that insurer, in which case the insurer shall notify the
former employee or spouse, or both, of the right to a conversion
policy.

(c) (1) If a former spouse of an employee or former employee
was covered as a qualified beneficiary under COBRA or
Cal-COBRA, the former spouse may further continue benefits
beyond the date coverage under COBRA or Cal-COBRA ends, as
set forth in paragraph (2) of subdivision (b). Except as otherwise
specified in this section, continuation coverage shall be under the
same benefit terms and conditions as if the continuation coverage
under COBRA or Cal-COBRA had remained in force. Continuation
coverage following the end of COBRA or Cal-COBRA is subject
to payment of premiums to the insurer. Premiums for continuation
coverage under this section shall be billed by, and remitted to, the
insurer in accordance with subdivision (d). Failure to pay the
requisite premiums may result in termination of the continuation
coverage in accordance with the applicable provisions in the
insurer’s group contract with the employer or former employer.

(2) The continuation coverage for the former spouse shall end
automatically on the earlier of (A) the date the individual reaches
65 years of age, (B) the date the individual is covered under any
group health plan not maintained by the employer or any other
health care service plan or insurer, regardless of whether that
coverage is less valuable, (C) the date the individual becomes
entitled to Medicare under Title XVIII of the Social Security Act,
(D) five years from the date on which continuation coverage under
COBRA or Cal-COBRA was scheduled to end for the former
spouse, or (E) the date on which the employer or former employer
terminates its group contract with the insurer and ceases to provide
coverage for any active employees through that insurer.

(d) (1) If the premium charged to the employer for a specific
employee or dependent eligible under this section is adjusted for
the age of the specific employee, or eligible dependent, on other
than a composite basis, the rate for continuation coverage under
this section shall not exceed 102 percent of the premium charged
by the insurer to the employer for an employee of the same age as
the former employee electing continuation coverage in the case of
an individual who was eligible for COBRA, and 110 percent in
the case of an individual who was eligible for Cal-COBRA. If the
coverage continued is that of a former spouse, the premium charged
shall not exceed 102 percent of the premium charged by the plan
to the employer for an employee of the same age as the former
spouse selecting continuation coverage in the case of an individual
who was eligible for COBRA, and 110 percent in the case of an
individual who was eligible for Cal-COBRA.

(2) If the premium charged to the employer for a specific
employee or dependent eligible under this section is not adjusted
for age of the specific employee, or eligible dependent, then the
rate for continuation coverage under this section shall not exceed
213 percent of the applicable current group rate. For purposes of
this section, the “applicable current group rate” means the total
premiums charged by the insurer for coverage for the group,
divided by the relevant number of covered persons.

(3) However, in computing the premiums charged to the specific
employer group, the insurer shall not include consideration of the
specific medical care expenditures for beneficiaries receiving
continuation coverage pursuant to this section.

(e) For purposes of this section, “COBRA” means Section
4980B of Title 26, Section 1161 and following of Title 29, and
Section 300bb of Title 42 of the United States Code, as added by
the Consolidated Omnibus Budget Reconciliation Act of 1985
(Public Law 99-272), and as amended.

(f) For purposes of this section, “Cal-COBRA” means the
continuation coverage that must be offered pursuant to Article 1.7
(commencing with Section 10128.50), or Article 4.5 (commencing
with Section 1366.20) of Chapter 2.2 of Division 2 of the Health
and Safety Code.

(g) For the purposes of this section, “former spouse” means
either an individual who is divorced from an employee or former
employee or an individual who was married to an employee or
former employee at the time of the death of the employee or former
employee.

(h) Every group benefit plan evidence of coverage that is issued,
amended, or renewed after January 1, 1999, shall contain a
description of the provisions and eligibility requirements for the
continuation coverage offered pursuant to this section.

(i) This section does not apply to any individual who is not
eligible for its continuation coverage prior to January 1, 2005.

SEC. 14.  

Section 10127.14 of the Insurance Code is amended
to read:

10127.14.  

(a) The department and the Department of Managed
Health Care shall compile information required by this section and
Section 1363.06 of the Health and Safety Code into two
comparative benefit matrices. The first matrix shall compare benefit
packages offered pursuant to Section 1373.62 of the Health and
Safety Code and Section 10127.15. The second matrix shall
compare benefit packages offered pursuant to Sections 1366.35,
1373.6, and 1399.804 of the Health and Safety Code and Sections
10785, 10901.2, and 12682.1.

(b) The comparative benefit matrix shall include:

(1) Benefit information submitted by health care service plans
pursuant to Section 1363.06 of the Health and Safety Code and by
health insurers pursuant to subdivision (d).

(2) The following statements in at least 12-point type at the top
of the matrix:

(A) “This benefit summary is intended to help you compare
coverage and benefits and is a summary only. For a more detailed
description of coverage, benefits, and limitations, please contact
the health care service plan or health insurer.”

(B) “The comparative benefit summary is updated annually, or
more often if necessary to be accurate.”

(C) “The most current version of this comparative benefit
summary is available on (address of the plan’s or insurer’s site).”

This subparagraph applies only to those health insurers that
maintain an Internet Web site.

(3) The telephone number or numbers that may be used by an
applicant to contact either the department or the Department of
Managed Health Care, as appropriate, for further assistance.

(c) The department and the Department of Managed Health
Care shall jointly prepare two standardized templates for use by
health care service plans and health insurers in submitting the
information required pursuant to subdivision (d) of Section 1363.06
and subdivision (d). The templates shall be exempt from the
provisions of Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code.

(d) Health insurers shall submit the following to the department
by January 31, 2003, and annually thereafter:

(1) A summary explanation of the following for each product
described in subdivision (a):

(A) Eligibility requirements.

(B) The full premium cost of each benefit package in the service
area in which the individual and eligible dependents work or reside.

(C) When and under what circumstances benefits cease.

(D) The terms under which coverage may be renewed.

(E) Other coverage that may be available if benefits under the
described benefit package cease.

(F) The circumstances under which choice in the selection of
physicians and providers is permitted.

(G) Lifetime and annual maximums.

(H) Deductibles.

(2) A summary explanation of the following coverages, together
with the corresponding copayments and limitations, for each
product described in subdivision (a):

(A) Professional services.

(B) Outpatient services.

(C) Hospitalization services.

(D) Emergency health coverage.

(E) Ambulance services.

(F) Prescription drug coverage.

(G) Durable medical equipment.

(H) Mental health services.

(I) Residential treatment.

(J) Chemical dependency services.

(K) Home health services.

(L) Custodial care and skilled nursing facilities.

(3) The telephone number or numbers that may be used by an
applicant to access a health insurer customer service representative
and to request additional information about the insurance policy.

(4) Any other information specified by the department in the
template.

(e) Each health insurer shall provide the department with updates
to the information required by subdivision (d) at least annually, or
more often if necessary to maintain the accuracy of the information.

(f) The department and the Department of Managed Health Care
shall make the comparative benefit matrices available on their
respective Internet Web sites and to the health care service plans
and health insurers for dissemination as required by Section 1373.6
of the Health and Safety Code and Section 12682.1, after
confirming the accuracy of the description of the matrices with
the health insurers and health care service plans.

(g) As used in this section, “benefit matrix” shall have the same
meaning as benefit summary.

(h) This section shall not apply to accident-only, specified
disease, hospital indemnity, CHAMPUS supplement, long-term
care, Medicare supplement, dental-only, or vision-only insurance
policies.

(i) (1) This section shall be inoperative on January 1, 2014.

(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. 300g-91), this
section shall become operative on the date of that repeal or
amendment.

(3) For purposes of this subdivision, “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.

SEC. 15.  

Section 10127.16 of the Insurance Code is amended
to read:

10127.16.  

(a) (1) After the termination of the pilot program
under Section 10127.15, a health insurer shall continue to provide
coverage under the same terms and conditions specified in Section
10127.15 as it existed on January 1, 2007, including the terms of
the standard benefit plan and the subscriber payment amount, to
each individual who was terminated from the program, pursuant
to subdivision (f) of Section 12725 of the Insurance Code during
the term of the pilot program and who enrolled or applied to enroll
in a standard benefit plan within 63 days of termination. The
Managed Risk Medical Insurance Board shall continue to pay the
amount described in Section 10127.15 for each of those individuals.
A health insurer shall not be required to offer the coverage
described in Section 10127.15 after the termination of the pilot
program to individuals not already enrolled in the program.

(2) Notwithstanding paragraph (1) of this subdivision or Section
10127.15 as it existed on January 1, 2007, the following rules shall
apply:

(A) (i) A health insurer shall not be obligated to provide
coverage to any individual pursuant to this section on or after
January 1, 2014.

(ii) The Managed Risk Medical Insurance Board shall not be
obligated to provide any payment to any health insurer under this
section for (I) health care expenses incurred on or after January 1,
2014, or (II) the standard monthly administrative fee, as defined
in Section 10127.15 as it existed on January 1, 2007, for any month
after December, 2013.

(B) Each health insurer providing coverage pursuant to this
section shall, on or before October 1, 2013, send a notice to each
individual enrolled in a standard benefit plan that is in at least
12-point type and with, at minimum, the following information:

(i) Notice as to whether or not the plan will terminate as of
January 1, 2014.

(ii) The availability of individual health coverage, including
through Covered California, including at least all of the following:

(I) That, beginning on January 1, 2014, individuals seeking
coverage may not be denied coverage based on health status.

(II) That the premium rates for coverage offered by a health
care service plan or a health insurer cannot be based on an
individual’s health status.

(III) That individuals obtaining coverage through Covered
California may, depending upon income, be eligible for premium
subsidies and cost-sharing subsidies.

(IV) That individuals seeking coverage must obtain this coverage
during an open or special enrollment period, and a description of
the open and special enrollment periods that may apply.

(C) As a condition of receiving payment for a reporting period
pursuant to this section, a health insurer shall provide the Managed
Risk Medical Insurance Board with a complete, final annual
reconciliation report by the earlier of December 31, 2014, or an
earlier date as prescribed by Section 10127.15, as it existed on
January 1, 2007, for that reporting period. To the extent that it
receives a complete, final reconciliation report for a reporting
period by the date required pursuant to this subparagraph, the
Managed Risk Medical Insurance Board shall complete
reconciliation with the health insurer for that reporting period
within six months of receiving the report.

(b) If the state fails to expend, pursuant to this section, sufficient
funds for the state’s contribution amount to any health insurer, the
health insurer may increase the monthly payments that its
subscribers are required to pay for any standard benefit plan to the
amount that the Managed Risk Medical Insurance Board would
charge without a state subsidy for the same insurance product
issued to the same individual within the program.

(c) The adoption and readoption, by the Managed Risk Medical
Insurance Board, of regulations implementing the amendments to
this section enacted by the legislation adding this subdivision shall
be deemed an emergency and necessary to avoid serious harm to
the public peace, health, safety, or general welfare for purposes of
Sections 11346.1 and 11349.6 of the Government Code, and the
Managed Risk Medical Insurance Board is hereby exempted from
the requirement that it describe facts showing the need for
immediate action and from review by the Office of Administrative
Law.

SEC. 16.  

Section 10127.18 of the Insurance Code is amended
to read:

10127.18.  

(a) On and after January 1, 2005, a health insurer
issuing individual policies of health insurance that ceases to offer
individual coverage in this state shall offer coverage to the
policyholders who had been covered by those policies at the time
of withdrawal under the same terms and conditions as provided in
paragraph (3) of subdivision (a), paragraphs (2) to (4), inclusive,
of subdivision (b), subdivisions (c) to (e), inclusive, and subdivision
(h) of Section 12682.1.

(b) The department may adopt regulations to implement this
section.

(c) This section shall not apply when a plan participating in
Medi-Cal, Healthy Families, Access for Infants and Mothers, or
any other contract between the plan and a government entity no
longer contracts with the government entity to provide health
coverage in the state, or a specified area of the state, nor shall this
section apply when a plan ceases entirely to market, offer, and
issue any and all forms of coverage in any part of this state after
the effective date of this section.

(d) (1) This section shall be inoperative on January 1, 2014.

(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-91), this
section shall become operative on the date of that repeal or
amendment.

(3) For purposes of this subdivision, “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.

SEC. 17.  

Section 10785 of the Insurance Code is amended to
read:

10785.  

(a) A disability insurer that covers hospital, medical,
or surgical expenses under an individual health benefit plan as
defined in subdivision (a) of Section 10198.6 may not, with respect
to a federally eligible defined individual desiring to enroll in
individual health insurance coverage, decline to offer coverage to,
or deny enrollment of, the individual or impose any preexisting
condition exclusion with respect to the coverage.

(b) For purposes of this section, “federally eligible defined
individual” means an individual who, as of the date on which the
individual seeks coverage under this section, meets all of the
following conditions:

(1) Has had 18 or more months of creditable coverage, and
whose most recent prior creditable coverage was under a group
health plan, a federal governmental plan maintained for federal
employees, or a governmental plan or church plan as defined in
the federal Employee Retirement Income Security Act of 1974
(29 U.S.C. Sec. 1002).

(2) Is not eligible for coverage under a group health plan,
Medicare, or Medi-Cal, and does not have other health insurance
coverage.

(3) Was not terminated from his or her most recent creditable
coverage due to nonpayment of premiums or fraud.

(4) If offered continuation coverage under COBRA or
Cal-COBRA, has elected and exhausted that coverage.

(c) Every disability insurer that covers hospital, medical, or
surgical expenses shall comply with applicable federal statutes
and regulations regarding the provision of coverage to federally
eligible defined individuals, including any relevant application
periods.

(d) A disability insurer shall offer the following health benefit
plans under this section that are designed for, made generally
available to, are actively marketed to, and enroll, individuals:
(1) either the two most popular products as defined in Section
300gg-41(c)(2) of Title 42 of the United States Code and Section
148.120(c)(2) of Title 45 of the Code of Federal Regulations or
(2) the two most representative products as defined in Section
300gg-41(c)(3) of the United States Code and Section
148.120(c)(3) of Title 45 of the Code of Federal Regulations, as
determined by the insurer in compliance with federal law. An
insurer that offers only one health benefit plan to individuals,
excluding health benefit plans offered to Medi-Cal or Medicare
beneficiaries, shall be deemed to be in compliance with this chapter
if it offers that health benefit plan contract to federally eligible
defined individuals in a manner consistent with this chapter.

(e) (1) In the case of a disability insurer that offers health benefit
plans in the individual market through a network plan, the insurer
may do both of the following:

(A) Limit the individuals who may be enrolled under that
coverage to those who live, reside, or work within the service area
for the network plan.

(B) Within the service area covered by the health benefit plan,
deny coverage to individuals if the insurer has demonstrated to the
commissioner that the insured will not have the capacity to deliver
services adequately to additional individual insureds because of
its obligations to existing group policyholders, group
contractholders and insureds, and individual insureds, and that the
insurer is applying this paragraph uniformly to individuals without
regard to any health status-related factor of the individuals and
without regard to whether the individuals are federally eligible
defined individuals.

(2) A disability insurer, upon denying health insurance coverage
in any service area in accordance with subparagraph (B) of
paragraph (1), may not offer health benefit plans through a network
in the individual market within that service area for a period of
180 days after the coverage is denied.

(f) (1) A disability insurer may deny health insurance coverage
in the individual market to a federally eligible defined individual
if the insurer has demonstrated to the commissioner both of the
following:

(A) The insurer does not have the financial reserves necessary
to underwrite additional coverage.

(B) The insurer is applying this subdivision uniformly to all
individuals in the individual market and without regard to any
health status-related factor of the individuals and without regard
to whether the individuals are federally eligible defined individuals.

(2) A disability insurer, upon denying individual health
insurance coverage in any service area in accordance with
paragraph (1), may not offer that coverage in the individual market
within that service area for a period of 180 days after the date the
coverage is denied or until the insurer has demonstrated to the
commissioner that the insurer has sufficient financial reserves to
underwrite additional coverage, whichever is later.

(g) The requirement pursuant to federal law to furnish a
certificate of creditable coverage shall apply to health benefits
plans offered by a disability insurer in the individual market in the
same manner as it applies to an insurer in connection with a group
health benefit plan policy or group health benefit plan contract.

(h) A disability insurer shall compensate a life agent, property
broker-agent, or casualty broker-agent whose activities result in
the enrollment of federally eligible defined individuals in the same
manner and consistent with the renewal commission amounts as
the insurer compensates life agents, property broker-agents, or
casualty broker-agents for other enrollees who are not federally
eligible defined individuals and who are purchasing the same
individual health benefit plan.

(i) Every disability insurer shall disclose as part of its COBRA
or Cal-COBRA disclosure and enrollment documents, an
explanation of the availability of guaranteed access to coverage
under the Health Insurance Portability and Accountability Act of
1996, including the necessity to enroll in and exhaust COBRA or
Cal-COBRA benefits in order to become a federally eligible
defined individual.

(j) No disability insurer may request documentation as to
whether or not a person is a federally eligible defined individual
other than is permitted under applicable federal law or regulations.

(k) This section shall not apply to coverage defined as excepted
benefits pursuant to Section 300gg(c) of Title 42 of the United
States Code.

(l) This section shall apply to policies or contracts offered,
delivered, amended, or renewed on or after January 1, 2001.

(m) (1) On and after January 1, 2014, and except as provided
in paragraph (2), this section shall apply only to individual
grandfathered health plans previously issued pursuant to this
section to federally eligible defined individuals.

(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. Section 300gg-91),
paragraph (1) shall become inoperative on the date of that repeal
or amendment and this section shall apply to health benefit plans
issued, amended, or renewed on or after that date.

(3) For purposes of this subdivision, the following definitions
apply:

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

(B) “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.

begin insert

begin insert SEC. 17.5. end insert   

end insert

begin insert Section 10785 of the end insert begin insert Insurance Code end insert begin insert is amended
to read: end insert

10785.  

(a) A disability insurer that covers hospital, medical,
or surgical expenses under an individual health benefit plan as
defined in subdivision (a) of Section 10198.6 may not, with respect
to a federally eligible defined individual desiring to enroll in
individual health insurance coverage, decline to offer coverage to,
or deny enrollment of, the individual or impose any preexisting
condition exclusion with respect to the coverage.

(b) For purposes of this section, “federally eligible defined
individual” means an individual who, as of the date on which the
individual seeks coverage under this section, meets all of the
following conditions:

(1) Has had 18 or more months of creditable coverage, and
whose most recent prior creditable coverage was under a group
health plan, a federal governmental plan maintained for federal
employees, or a governmental plan or church plan as defined in
the federal Employee Retirement Income Security Act of 1974
(29 U.S.C. Sec. 1002).

(2) Is not eligible for coverage under a group health plan,
Medicare, or Medi-Cal, and does not have other health insurance
coverage.

(3) Was not terminated from his or her most recent creditable
coverage due to nonpayment of premiums or fraud.

(4) If offered continuation coverage under COBRA or
Cal-COBRA, has elected and exhausted that coverage.

(c) Every disability insurer that covers hospital, medical, or
surgical expenses shall comply with applicable federal statutes
and regulations regarding the provision of coverage to federally
eligible defined individuals, including any relevant application
periods.

(d) A disability insurer shall offer the following health benefit
plans under this section that are designed for, made generally
available to, are actively marketed to, and enroll, individuals:
(1) either the two most popular products as defined in Section
300gg-41(c)(2) of Title 42 of the United States Code and Section
148.120(c)(2) of Title 45 of the Code of Federal Regulations or
(2) the two most representative products as defined in Section
300gg-41(c)(3) of the United States Code and Section
148.120(c)(3) of Title 45 of the Code of Federal Regulations, as
determined by the insurer in compliance with federal law. An
insurer that offers only one health benefit plan to individuals,
excluding health benefit plans offered to Medi-Cal or Medicare
beneficiaries, shall be deemed to be in compliance with this chapter
if it offers that health benefit plan contract to federally eligible
defined individuals in a manner consistent with this chapter.

(e) (1) In the case of a disability insurer that offers health benefit
plans in the individual market through a network plan, the insurer
may do both of the following:

(A) Limit the individuals who may be enrolled under that
coverage to those who live, reside, or work within the service area
for the network plan.

(B) Within the service area covered by the health benefit plan,
deny coverage to individuals if the insurer has demonstrated to the
commissioner that the insured will not have the capacity to deliver
services adequately to additional individual insureds because of
its obligations to existing group policyholders, group
contractholders and insureds, and individual insureds, and that the
insurer is applying this paragraph uniformly to individuals without
regard to any health status-related factor of the individuals and
without regard to whether the individuals are federally eligible
defined individuals.

(2) A disability insurer, upon denying health insurance coverage
in any service area in accordance with subparagraph (B) of
paragraph (1), may not offer health benefit plans through a network
in the individual market within that service area for a period of
180 days after the coverage is denied.

(f) (1) A disability insurer may deny health insurance coverage
in the individual market to a federally eligible defined individual
if the insurer has demonstrated to the commissioner both of the
following:

(A) The insurer does not have the financial reserves necessary
to underwrite additional coverage.

(B) The insurer is applying this subdivision uniformly to all
individuals in the individual market and without regard to any
health status-related factor of the individuals and without regard
to whether the individuals are federally eligible defined individuals.

(2) A disability insurer, upon denying individual health
insurance coverage in any service area in accordance with
paragraph (1), may not offer that coverage in the individual market
within that service area for a period of 180 days after the date the
coverage is denied or until the insurer has demonstrated to the
commissioner that the insurer has sufficient financial reserves to
underwrite additional coverage, whichever is later.

(g) The requirement pursuant to federal law to furnish a
certificate of creditable coverage shall apply to health benefits
plans offered by a disability insurer in the individual market in the
same manner as it applies to an insurer in connection with a group
health benefit plan policy or group health benefit plan contract.

(h) A disability insurer shall compensate begin delete a life agent, property
broker-agent, or casualty broker-agent end delete begin insert an accident and health
agent or a life and accident and health agent end insert whose activities
result in the enrollment of federally eligible defined individuals
in the same manner and consistent with the renewal commission
amounts as the insurer compensates begin delete life agents, property
broker-agents, or casualty broker-agents end delete begin insert accident and health agents
or life and accident and health agents end insert for other enrollees who are
not federally eligible defined individuals and who are purchasing
the same individual health benefit plan.

(i) Every disability insurer shall disclose as part of its COBRA
or Cal-COBRA disclosure and enrollment documents, an
explanation of the availability of guaranteed access to coverage
under the begin insert federal end insert Health Insurance Portability and Accountability
Act of 1996, including the necessity to enroll in and exhaust
COBRA or Cal-COBRA benefits in order to become a federally
eligible defined individual.

(j) No disability insurer may request documentation as to
whether or not a person is a federally eligible defined individual
other than is permitted under applicable federal law or regulations.

(k) This section shall not apply to coverage defined as excepted
benefits pursuant to Section 300gg(c) of Title 42 of the United
States Code.

(l) This section shall apply to policies or contracts offered,
delivered, amended, or renewed on or after January 1, 2001.

begin insert

(m) (1) On and after January 1, 2014, and except as provided
in paragraph (2), this section shall apply only to individual
grandfathered health plans previously issued pursuant to this
section to federally eligible defined individuals.

end insert begin insert

(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-91), paragraph
(1) shall become inoperative on the date of that repeal or
amendment and this section shall apply to health benefit plans
issued, amended, or renewed on or after that date.

end insert begin insert

(3) For purposes of this subdivision, the following definitions
apply:

end insert begin insert

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

end insert begin insert

(B) “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.

end insert

SEC. 18.  

Section 10901.3 of the Insurance Code is amended
to read:

10901.3.  

(a) (1) After the federally eligible defined individual
submits a completed application form for a health benefit plan,
the carrier shall, within 30 days, notify the individual of the
individual’s actual premium charges for that health benefit plan
design. In no case shall the premium charged for any health benefit
plan identified in subdivision (d) of Section 10785 exceed the
following amounts:

(A) For health benefit plans that offer services through a
preferred provider arrangement, the average premium paid by a
subscriber of the Major Risk Medical Insurance Program who is
of the same age and resides in the same geographic area as the
federally eligible defined individual. However, for a federally
eligible defined individual who is between the ages of 60 and 64
years, inclusive, the premium shall not exceed the average premium
paid by a subscriber of the Major Risk Medical Insurance Program
who is 59 years of age and resides in the same geographic area as
the federally eligible defined individual.

(B) For health benefit plans identified in subdivision (d) of
Section 10785 that do not offer services through a preferred
provider arrangement, 170 percent of the standard premium charged
to an individual who is of the same age and resides in the same
geographic area as the federally eligible defined individual.
However, for a federally eligible defined individual who is between
the ages of 60 and 64 years, inclusive, the premium shall not exceed
170 percent of the standard premium charged to an individual who
is 59 years of age and resides in the same geographic area as the
federally eligible defined individual. The individual shall have 30
days in which to exercise the right to buy coverage at the quoted
premium rates.

(2) A carrier may adjust the premium based on family size, not
to exceed the following amounts:

(A) For health benefit plans that offer services through a
preferred provider arrangement, the average of the Major Risk
Medical Insurance Program rate for families of the same size that
reside in the same geographic area as the federally eligible defined
individual.

(B) For health benefit plans identified in subdivision (d) of
Section 10785 that do not offer services through a preferred
provider arrangement, 170 percent of the standard premium charged
to a family that is of the same size and resides in the same
geographic area as the federally eligible defined individual.

(3) This subdivision shall begin delete became end delete begin insert become end insert inoperative on January
1, 2014. This subdivision shall become operative on January 1,
2020.

(b) (1) On and after January 1, 2014, after the federally eligible
defined individual submits a completed application form for a
health benefit plan, the carrier shall, within 30 days, notify the
individual of the individual’s actual premium charges for that
health benefit plan design. In no case shall the premium charged
for any health benefit plan identified in subdivision (d) of Section
10785 exceed the following amounts:

(A) With respect to the rate charged for coverage provided in
2014, the rate charged in 2013 for that coverage multiplied by
1.09.

(B) With respect to the rate charged for coverage provided in
2015 and each subsequent year, the rate charged in the prior year
multiplied by a factor of one plus the percentage change in the
statewide average premium for the second lowest cost silver plan
offered on the Exchange. The Exchange shall determine the
percentage change in the statewide average premium for the second
lowest cost silver plan by subtracting clause (i) from clause (ii)
and dividing the result by clause (i).

(i) The average of the premiums charged in the year prior to the
applicable year for the second lowest cost silver plan in all 19
rating regions, with the premium for each region weighted based
on the region’s relative share of the Exchange’s total individual
enrollment according to the latest data available to the Exchange.

(ii) The average of the premiums to be charged in the applicable
year for the second lowest cost silver plan in all 19 rating regions,
with the premium for each region weighted based on the region’s
relative share of the Exchange’s total individual enrollment
according to the latest data available to the Exchange.

(C) The Exchange shall determine the percentage change in the
statewide average premium no later than 30 days after the
Exchange’s rates for individual coverage for the applicable year
have been finalized.

(2) For purposes of this subdivision, “Exchange” means the
California Health Benefit Exchange established pursuant to Section
100500 of the Government Code.

(3) This subdivision shall become operative on January 1, 2014,
and shall become inoperative on January 1, 2020.

(c) When a federally eligible defined 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 shall begin 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.

(d) During the first 30 days after the effective date of the health
benefit plan, the individual shall have the option of changing
coverage to a different health benefit plan design offered by the
same carrier. If the individual notified the plan 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 an enrolled individual notified the carrier of
the change after the 15th day of a month, coverage under the health
benefit plan shall become effective no later than the first day of
the second month following notification.

(e) (1) On and after January 1, 2014, and except as provided
in paragraph (2), this section shall apply only to individual
grandfathered health plans previously issued pursuant to this
section to federally eligible defined individuals.

(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. Section 300gg-91),
paragraph (1) shall become inoperative on the date of that repeal
or amendment and this section shall apply to health benefit plans
issued, amended, or renewed on or after that date.

(3) For purposes of this subdivision, the following definitions
apply:

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

(B) “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.

SEC. 19.  

Section 10901.8 of the Insurance Code is amended
to read:

10901.8.  

All health benefit plans offered to a federally eligible
defined individual shall be renewable with respect to the individual
and dependents at the option of the enrolled individual except in
cases of:

(a) Nonpayment of the required premiums.

(b) Fraud or misrepresentation by the enrolled individual.

(c) The carrier ceases to provide or arrange for the provision of
health care services for individual health benefit plan contracts in
this state, provided, however, that the following conditions are
satisfied:

(1) Notice of the decision to cease new or existing individual
health benefit plans in this state is provided to the commissioner
and to the contractholder.

(2) Individual health benefit plan contracts subject to this chapter
shall not be canceled for 180 days after the date of the notice
required under paragraph (1) and for that business of a carrier that
remains in force, any carrier that ceases to offer for sale new
individual health benefit plan contracts shall continue to be
governed by this article with respect to business conducted under
this chapter.

(3) A carrier that ceases to write new individual business in this
state after the effective date of this chapter shall be prohibited from
offering for sale new individual health benefit plan contracts in
this state for a period of three years from the date of the notice to
the commissioner.

(d) When a carrier withdraws a health benefit plan design from
the individual market, provided that a carrier makes available to
eligible individuals all health plan benefit designs that it makes
available to new individual business, and provided that premium
for the new health benefit plan complies with the renewal increase
requirements set forth in Section 10901.9.

(e) (1) On and after January 1, 2014, and except as provided
in paragraph (2), this section shall apply only to individual
grandfathered health plans previously issued pursuant to this
section to federally eligible defined individuals.

(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. Section 300gg-91),
paragraph (1) shall become inoperative on the date of that repeal
or amendment and this section shall apply to health benefit plans
issued, amended, or renewed on or after that date.

(3) For purposes of this subdivision, the following definitions
apply:

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

(B) “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.

SEC. 20.  

Section 10901.9 of the Insurance Code is amended
to read:

10901.9.  

(a) Commencing January 1, 2001, premiums for
health benefit plans offered, delivered, amended, or renewed by
carriers shall be subject to the following requirements:

(1) The premium for new business for a federally eligible
defined individual shall not exceed the following amounts:

(A) For health benefit plans identified in subdivision (d) of
Section 10785 that offer services through a preferred provider
arrangement, the average premium paid by a subscriber of the
Major Risk Medical Insurance Program who is of the same age
and resides in the same geographic area as the federally eligible
defined individual. However, for federally eligible defined
individuals who are between 60 to 64 years of age, inclusive, the
premium shall not exceed the average premium paid by a subscriber
of the Major Risk Medical Insurance Program who is 59 years of
age and resides in the same geographic area as the federally eligible
defined individual.

(B) For health benefit plans identified in subdivision (d) of
Section 10785 that do not offer services through a preferred
provider arrangement, 170 percent of the standard premium charged
to an individual who is of the same age and resides in the same
geographic area as the federally eligible defined individual.
However, for federally eligible defined individuals who are
between 60 to 64 years of age, inclusive, the premium shall not
exceed 170 percent of the standard premium charged to an
individual who is 59 years of age and resides in the same
geographic area as the federally eligible defined individual.

(2) The premium for in force business for a federally eligible
defined individual shall not exceed the following amounts:

(A) For health benefit plans identified in subdivision (d) of
Section 10785 that offer services through a preferred provider
arrangement, the average premium paid by a subscriber of the
Major Risk Medical Insurance Program who is of the same age
and resides in the same geographic area as the federally eligible
defined individual. However, for federally eligible defined
individuals who are between 60 and 64 years of age, inclusive, the
premium shall not exceed the average premium paid by a subscriber
of the Major Risk Medical Insurance Program who is 59 years of
age and resides in the same geographic area as the federally eligible
defined individual.

(B) For health benefit plans identified in subdivision (d) of
Section 10785 that do not offer services through a preferred
provider arrangement, 170 percent of the standard premium charged
to an individual who is of the same age and resides in the same
geographic area as the federally eligible defined individual.
However, for federally eligible defined individuals who are
between 60 and 64 years of age, inclusive, the premium shall not
exceed 170 percent of the standard premium charged to an
individual who is 59 years of age and resides in the same
geographic area as the federally eligible defined individual. The
premium effective on January 1, 2001, shall apply to in force
business at the earlier of either the time of renewal or July 1, 2001.

(3) This subdivision shall begin delete became end delete begin insert become end insert inoperative January
1, 2014. This subdivision shall become operative on January 1,
2020.

(b) (1) Commencing January 1, 2014, premiums for health
benefit plans offered, delivered, amended, or renewed by carriers
shall be subject to the following requirements:

(A) With respect to the rate charged for coverage provided in
2014, the rate charged in 2013 for that coverage multiplied by
1.09.

(B) With respect to the rate charged for coverage provided in
2015 and each subsequent year, the rate charged in the prior year
multiplied by a factor of one plus the percentage change in the
statewide average premium for the second lowest cost silver plan
offered on the Exchange. The Exchange shall determine the
percentage change in the statewide average premium for the second
lowest cost silver plan by subtracting clause (i) from clause (ii)
and dividing the result by clause (i).

(i) The average of the premiums charged in the year prior to the
applicable year for the second lowest cost silver plan in all 19
rating regions, with the premium for each region weighted based
on the region’s relative share of the Exchange’s total individual
enrollment according to the latest data available to the Exchange.

(ii) The average of the premiums to be charged in the applicable
year for the second lowest cost silver plan in all 19 rating regions,
with the premium for each region weighted based on the region’s
relative share of the Exchange’s total individual enrollment
according to the latest data available to the Exchange.

(C) The Exchange shall determine the percentage change in the
statewide average premium no later than 30 days after the
Exchange’s rates for individual coverage for the applicable year
have been finalized.

(2) For purposes of this subdivision, “Exchange” means the
California Health Benefit Exchange established pursuant to Section
100500 of the Government Code.

(3) This subdivision shall become operative on January 1, 2014,
and shall become inoperative on January 1, 2020.

(c) The premium applied to a federally eligible defined
individual may not increase by more than the following amounts:

(1) For health benefit plans identified in subdivision (d) of
Section 10785 that offer services through a preferred provider
arrangement, the average increase in the premiums charged to a
subscriber of the Major Risk Medical Insurance Program who is
of the same age and resides in the same geographic area as the
federally eligible defined individual.

(2) For health benefit plans identified in subdivision (d) of
Section 10785 that do not offer services through a preferred
provider arrangement, the increase in premiums charged to a
nonfederally eligible defined individual who is of the same age
and resides in the same geographic area as the federally begin delete defined end delete
eligible begin insert defined end insert individual. The premium for an eligible individual
may not be modified more frequently than every 12 months.

(3) For a contract that a carrier has discontinued offering, the
premium applied to the first rating period of the new contract that
the federally eligible defined individual elects to purchase shall
be no greater than the premium applied in the prior rating period
to the discontinued contract.

(d) (1) On and after January 1, 2014, and except as provided
in paragraph (2), this section shall apply only to individual
grandfathered health plans previously issued pursuant to this
section to federally eligible defined individuals.

(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. Section 300gg-91),
paragraph (1) shall become inoperative on the date of that repeal
or amendment and this section shall apply to health benefit plans
issued, amended, or renewed or amended on or after that date.

(3) For purposes of this subdivision, the following definitions
apply:

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

(B) “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.

SEC. 21.  

Section 10902.3 of the Insurance Code is amended
to read:

10902.3.  

(a) At least 20 business days prior to renewing or
amending a health benefit plan contract subject to this chapter, or
at least 20 business days prior to the initial offering of a health
benefit plan subject to this chapter, a carrier shall file a statement
with the commissioner in the same manner as required for small
employers as outlined in Section 10717. The statement shall include
a statement certifying that the carrier is in compliance with
subdivision (a) of Section 10901.3 and with Section 10901.9. Any
action by the commissioner, as permitted under Section 10717, to
disapprove, suspend, or postpone the plan’s use of a carrier’s health
benefit plan design shall be in writing, specifying the reasons the
health benefit plan does not comply with the requirements of this
chapter.

(b) Prior to making any changes in the premium, the carrier
shall file an amendment in the same manner as required for small
employers as outlined in Section 10717, and shall include a
statement certifying the carrier is in compliance with subdivision
(a) of Section 10901.3 and with Section 10901.9. All other changes
to a health benefit plan previously filed with the commissioner
pursuant to subdivision (a) shall be filed as an amendment in the
same manner as required for small employers as outlined in Section
10717.

(c) (1) On and after January 1, 2014, and except as provided
in paragraph (2), this section shall apply only to individual
grandfathered health plans previously issued pursuant to this
section to federally eligible defined individuals.

(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. Section 300gg-91),
paragraph (1) shall become inoperative on the date of that repeal
or amendment and this section shall apply to health benefit plans
issued, amended, or renewed on or after that date.

(3) For purposes of this subdivision, the following definitions
apply:

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

(B) “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.

SEC. 22.  

Section 10902.6 of the Insurance Code is repealed.

SEC. 23.  

Section 12672 of the Insurance Code is amended to
read:

12672.  

(a) Any group policy issued, amended, or renewed in
this state on or after January 1, 1983, which provides insurance
for employees or members on an expense-incurred or service basis,
other than for a specific disease or for accidental injuries only,
shall contain a provision that an employee or member whose
coverage under the group policy has been terminated for any reason
except as provided in this part, shall be entitled to have a converted
policy issued to him or her by the insurer under whose group policy
he or she was covered, without evidence of insurability, subject
to the terms and conditions of this part.

(b) (1) This section shall be inoperative on January 1, 2014.

(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-91), this
section shall become operative on the date of that repeal or
amendment.

(3) For purposes of this subdivision, “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.

SEC. 24.  

Section 12682.1 of the Insurance Code is amended
to read:

12682.1.  

This section does not apply to a policy that primarily
or solely supplements Medicare. The commissioner may adopt
rules consistent with federal law to govern the discontinuance and
replacement of plan policies that primarily or solely supplement
Medicare.

(a) (1) Every group policy entered into, amended, or renewed
on or after September 1, 2003, that provides hospital, medical, or
surgical expense benefits for employees or members shall provide
that an employee or member whose coverage under the group
policy has been terminated by the employer shall be entitled to
convert to nongroup membership, without evidence of insurability,
subject to the terms and conditions of this section.

(2) If the health insurer provides coverage under an individual
health insurance policy, other than conversion coverage under this
part, it shall offer one of the two health insurance policies that the
insurer is required to offer to a federally eligible defined individual
pursuant to Section 10785. The health insurer shall provide this
coverage at the same rate established under Section 10901.3 for a
federally eligible defined individual.

(3) If the health insurer does not provide coverage under an
individual health insurance policy, it shall offer a health benefit
plan contract that is the same as a health benefit contract offered
to a federally eligible defined individual pursuant to Section
1366.35. The health insurer shall offer the most popular preferred
provider organization plan that has the greatest number of enrolled
individuals for its type of plan as of January 1 of the prior year, as
reported by plans by January 31, 2003, and annually thereafter,
that provide coverage under an individual health care service plan
contract to the department or the Department of Managed Health
Care. A health insurer subject to this paragraph shall provide this
coverage with the same cost-sharing terms and at the same
premium as a health care service plan providing coverage to that
individual under an individual health care service plan contract
pursuant to Section 1399.805. The health insurer shall file the
health benefit plan contract it will offer, including the premium it
will charge and the cost-sharing terms of the contract, with the
Department of Insurance.

(b) A conversion policy shall not be required to be made
available to an employee or insured if termination of his or her
coverage under the group policy occurred for any of the following
reasons:

(1) The group policy terminated or an employer’s participation
terminated and the insurance is replaced by similar coverage under
another group policy within 15 days of the date of termination of
the group coverage or the employer’s participation.

(2) The employee or insured failed to pay amounts due the health
insurer.

(3) The employee or insured was terminated by the health insurer
from the policy for good cause.

(4) The employee or insured knowingly furnished incorrect
information or otherwise improperly obtained the benefits of the
policy.

(5) The employer’s hospital, medical, or surgical expense benefit
program is self-insured.

(c) A conversion policy is not required to be issued to any person
if any of the following facts are present:

(1) The person is covered by or is eligible for benefits under
Title XVIII of the United States Social Security Act.

(2) The person is covered by or is eligible for hospital, medical,
or surgical benefits under any arrangement of coverage for
individuals in a group, whether insured or self-insured.

(3) The person is covered for similar benefits by an individual
policy or contract.

(4) The person has not been continuously covered during the
three-month period immediately preceding that person’s
termination of coverage.

(d) Benefits of a conversion policy shall meet the requirements
for benefits under this chapter.

(e) Unless waived in writing by the insurer, written application
and first premium payment for the conversion policy shall be made
not later than 63 days after termination from the group. A
conversion policy shall be issued by the insurer which shall be
effective on the day following the termination of coverage under
the group contract if the written application and the first premium
payment for the conversion contract are made to the insurer not
later than 63 days after the termination of coverage, unless these
requirements are waived in writing by the insurer.

(f) The conversion policy shall cover the employee or insured
and his or her dependents who were covered under the group policy
on the date of their termination from the group.

(g) A notification of the availability of the conversion coverage
shall be included in each evidence of coverage or other legally
required document explaining coverage. However, it shall be the
sole responsibility of the employer to notify its employees of the
availability, terms, and conditions of the conversion coverage
which responsibility shall be satisfied by notification within 15
days of termination of group coverage. Group coverage shall not
be deemed terminated until the expiration of any continuation of
the group coverage. For purposes of this subdivision, the employer
shall not be deemed the agent of the insurer for purposes of
notification of the availability, terms, and conditions of conversion
coverage.

(h) As used in this section, “hospital, medical, or surgical
benefits under state or federal law” do not include benefits under
Chapter 7 (commencing with Section 14000) or Chapter 8
(commencing with Section 14200) of Part 3 of Division 9 of the
Welfare and Institutions Code, or Title XIX of the United States
Social Security Act.

(i) (1) On and after January 1, 2014, and except as provided in
paragraph (2), this section shall not apply to any health insurance
policies.

(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. Section 300gg-91),
paragraph (1) shall become inoperative on the date of that repeal
or amendment and this section shall apply to health insurance
policies issued, renewed, or amended on or after that date.

(3) For purposes of this subdivision, “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.

SEC. 25.  

Section 12682.2 is added to the Insurance Code, to
read:

12682.2.  

(a) (1) At least 60 days prior to the policy renewal
date, an insurer that does not otherwise issue individual health
insurance policies shall issue the notice described in paragraph (2)
to any policyholder of an individual health insurance policy issued
pursuant to Section 12682.1 that is not a grandfathered health plan.

(2) The notice shall be in at least 12-point type and shall include
all of the following information:

(A) Notice that, as of the renewal date, the individual policy
will not be renewed.

(B) The availability of individual health coverage through
Covered California, including at least all of the following:

(i) That, beginning on January 1, 2014, individuals seeking
coverage may not be denied coverage based on health status.

(ii) That the premium rates for coverage offered by a health care
service plan or a health insurer cannot be based on an individual’s
health status.

(iii) That individuals obtaining coverage through Covered
California may, depending upon income, be eligible for premium
subsidies and cost-sharing subsidies.

(iv) That individuals seeking coverage must obtain this coverage
during an open or special enrollment period, and describe the open
and special enrollment periods that may apply.

(b) (1) At least 60 days prior to the policy renewal date, an
insurer that issues individual health insurance policies shall issue
the notice described in paragraph (2) to a policyholder of an
individual health insurance policy issued pursuant to Section 10785
or 12682.1 that is not a grandfathered health plan.

(2) The notice shall be in at least 12-point type and shall include
all of the following:

(A) Notice that, as of the renewal date, the individual policy
shall not be renewed.

(B) Information regarding the individual health insurance policy
that the insurer will issue as of January 1, 2014, which the insurer
has reasonably concluded is the most comparable to the
individual’s current policy. The notice shall include information
on premiums for the possible replacement policy and instructions
that the individual can continue their coverage by paying the
premium stated by the due date.

(C) Notice of the availability of other individual health coverage
through Covered California, including at least all of the following:

(i) That, beginning on January 1, 2014, individuals seeking
coverage may not be denied coverage based on health status.

(ii) That the premium rates for coverage offered by a health care
service plan or a health insurer cannot be based on an individual’s
health status.

(iii) That individuals obtaining coverage through Covered
California may, depending upon income, be eligible for premium
subsidies and cost-sharing subsidies.

(iv) That individuals seeking coverage must obtain this coverage
during an open or special enrollment period, and describe the open
and special enrollment periods that may apply.

(c) No later than September 1, 2013, the commissioner, in
consultation with the Department of Managed Health Care, shall
adopt uniform model notices that health begin delete plans end delete begin insert insurers end insert shall use
to comply with subdivisions (a) and (b) and Sections 10127.16,
10786, and 10965.13. Use of the model notices shall not require
prior approval by the department. The model notices adopted 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). The
begin delete director end delete begin insert commissioner end insert may modify the wording of these model
notices specifically for purposes of clarity, readability, and
accuracy.

(d) The notices required under this section are vital documents,
pursuant to clause (iii) of subparagraph (B) of paragraph (1) of
subdivision (b) of Section 10133.8, and shall be subject to the
requirements of that section.

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

(1) “Covered California” means the California Health Benefit
Exchange established pursuant to Section 100500 of the
Government Code.

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

(3) “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.

begin insert

begin insert SEC. 26. end insert   

end insert begin insert

Section 17.5 of this bill incorporates amendments to
Section 10785 of the Insurance Code proposed by both this bill
and Assembly Bill 1391. It shall only become operative if (1) both
bills are enacted and become effective on or before January 1,
2014, but this bill becomes operative first, (2) each bill amends
Section 10785 of the Insurance Code, and (3) this bill is enacted
after Assembly Bill 1391, in which case Section 10785 of the
Insurance Code, as amended by Section 17 of this bill, shall remain
operative only until the operative date of Assembly Bill 1391, at
which time Section 17.5 of this bill shall become operative.

end insert

begin delete SEC. 26. end delete
begin insert SEC. 27. end insert   

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

begin delete SEC. 27. end delete
begin insert SEC. 28. end insert   

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

In order for the public to be informed in a timely manner of
critical changes to health care coverage, it is necessary that this
bill take effect immediately.