Amended in Assembly April 22, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 1962

Introduced by Assembly Member Skinner

(Coauthors: Assembly Members Bocanegra, Bonilla, Bonta, Holden, Nestande, Pan, Waldron, and Weber)

(Coauthors: Senators Berryhill and Mitchell)

February 19, 2014

An act to amend Section 1367.003 of, and to add Section 1367.004 to, the Health and Safety Code, and to amend Section 10112.25 of, and to add Section 10112.26 to, the Insurance Code, relating to health care coverage.

LEGISLATIVE COUNSEL’S DIGEST

AB 1962, as amended, Skinner. Dental plans: medical loss ratios: rebates.

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 requires a health care service plan or health insurer to comply with specified minimum medical loss ratios and requires a plan or insurer to provide an annual rebate to enrollees and insureds if the ratio of the amount of premium revenue expended by the plan or insurer on specified costs to the total amount of premium revenue is less than a certain percentage. Existing law specifies that these requirements do not apply to specialized health care service plan contracts or specialized health insurance policies.

This bill would require specialized dental health care service plan contracts and specialized dental health insurance policies to comply with parallel requirements. The bill would authorize the departments to adopt regulations implementing these provisions and would require that those regulations parallel the regulations adopted with respect to full-service plan contracts and policies. Because a willful violation of the bill’s requirements by a health care service plan would be a crime, the bill would impose a state-mandated local program.

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

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

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

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

SECTION 1.  

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

1367.003.  

(a) Every health care service plan that issues, sells,
renews, or offers health care service plan contracts for health care
coverage in this state, including a grandfathered health plan, but
not including specialized health care service plan contracts, except
as provided in Section 1367.004, shall provide an annual rebate
to each enrollee under such coverage, on a pro rata basis, if the
ratio of the amount of premium revenue expended by the health
care service plan on the costs for reimbursement for clinical
services provided to enrollees under such coverage and for
activities that improve health care quality to the total amount of
premium revenue, excluding federal and state taxes and licensing
or regulatory fees and after accounting for payments or receipts
for risk adjustment, risk corridors, and reinsurance, is less than the
following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(h) Nothing in this section shall be construed to apply to a health
care service plan contract or insurance policy issued, sold, renewed,
or offered for health care services or coverage provided in the
Medi-Cal program (Chapter 7 (commencing with Section 14000)
of Part 3 of Division 9 of the Welfare and Institutions Code), the
Healthy Families Program (Part 6.2 (commencing with Section
12693) of Division 2 of the Insurance Code), the Access for Infants
and Mothers Program (Part 6.3 (commencing with Section 12695)
of Division 2 of the Insurance Code), the California Major Risk
Medical Insurance Program (Part 6.5 (commencing with Section
12700) of Division 2 of the Insurance Code), or the Federal
Temporary High Risk Insurance Pool (Part 6.6 (commencing with
Section 12739.5) of Division 2 of the Insurance Code), to the extent
consistent with the federal Patient Protection and Affordable Care
Act (Public Law 111-148).

SEC. 2.  

Section 1367.004 is added to the Health and Safety
Code, to read:

1367.004.  

(a) A health care service plan that issues, sells,
renews, or offers a specialized health care service plan contract
covering dental services shall provide an annual rebate to each
enrollee under that coverage, on a pro rata basis, if the ratio of the
amount of premium revenue expended by the health care service
plan on the costs for reimbursement for clinical services provided
to enrollees under that coverage and for activities that improve
dental care quality to the total amount of premium revenue,
excluding federal and state taxes and licensing or regulatory fees
and after accounting for payments or receipts for risk adjustment,
risk corridors, and reinsurance, is less than the following:

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

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

(b) A health care service plan that issues, sells, renews, or offers
specialized health care service plan contracts covering dental
services in this state shall comply with the following minimum
medical loss ratios:

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

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

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

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

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

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

(d) (1) The director may adopt regulations in accordance with
the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code) that are necessary to implement the medical loss ratio as
described in this section. The regulations shall parallel the
regulations adopted under subdivision (d) of Section 1367.003.

(2) The director may also adopt emergency regulations in
accordance with the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code) as necessary to implement this section.
The initial adoption of the emergency regulations shall be deemed
to be an emergency and necessary for the immediate preservation
of the public peace, health, safety, or general welfare. The
emergency regulations shall be parallel to any emergency
regulations adopted pursuant to subdivision (d) of Section
1367.003.

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

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

(f) Nothing in this section shall be construed to apply to a health
care service plan contract or insurance policy issued, sold, renewed,
or offered for health care services or coverage provided in the
Medi-Cal program (Chapter 7 (commencing with Section 14000)
of Part 3 of Division 9 of the Welfare and Institutions Code), the
Healthy Families Program (Part 6.2 (commencing with Section
12693) of Division 2 of the Insurance Code), the Access for Infants
and Mothers Program (Part 6.3 (commencing with Section 12695)
of Division 2 of the Insurance Code), the California Major Risk
Medical Insurance Program (Part 6.5 (commencing with Section
12700) of Division 2 of the Insurance Code), or the Federal
Temporary High Risk Pool (Part 6.6 (commencing with Section
12739.5) of Division 2 of the Insurance Code).

SEC. 3.  

Section 10112.25 of the Insurance Code is amended
to read:

10112.25.  

(a) Every health insurer that issues, sells, renews,
or offers health insurance policies for health care coverage in this
state, including a grandfathered health plan, but not including
specialized health insurance policies, except as provided in Section
10112.26, shall provide an annual rebate to each insured under
such coverage, on a pro rata basis, if the ratio of the amount of
premium revenue expended by the health insurer on the costs for
reimbursement for clinical services provided to insureds under
such coverage and for activities that improve health care quality
to the total amount of premium revenue, excluding federal and
state taxes and licensing or regulatory fees and after accounting
for payments or receipts for risk adjustment, risk corridors, and
reinsurance, is less than the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

(g) Nothing in this section shall be construed to apply to a health
care service plan contract or insurance policy issued, sold, renewed,
or offered for health care services or coverage provided in the
Medi-Cal program (Chapter 7 (commencing with Section 14000)
of Part 3 of Division 9 of the Welfare and Institutions Code), the
Healthy Families Program (Part 6.2 (commencing with Section
12693)), the Access for Infants and Mothers Program (Part 6.3
(commencing with Section 12695)), the California Major Risk
Medical Insurance Program (Part 6.5 (commencing with Section
12700)), or the Federal Temporary High Risk Insurance Pool (Part
6.6 (commencing with Section 12739.5)), to the extent consistent
with the federal Patient Protection and Affordable Care Act (Public
Law 111-148).

SEC. 4.  

Section 10112.26 is added to the Insurance Code, to
read:

10112.26.  

(a) A health insurer that issues, sells, renews, or
offers a specialized health insurance policy covering dental services
shall provide an annual rebate to each insured under that coverage,
on a pro rata basis, if the ratio of the amount of premium revenue
expended by the insurer on the costs for reimbursement for clinical
services provided to insureds under that coverage and for activities
that improve dental care quality to the total amount of premium
revenue, excluding federal and state taxes and licensing or
regulatory fees and after accounting for payments or receipts for
risk adjustment, risk corridors, and reinsurance, is less than the
following:

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

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

(b) A health insurer that issues, sells, renews, or offers
specialized health insurance policies covering dental services in
this state shall comply with the following minimum medical loss
ratios:

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

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

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

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

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

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

(d) (1) The commissioner may adopt regulations in accordance
with the Administrative Procedure Act (Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code) that are necessary to implement the medical
loss ratio as described in this section. The regulations shall parallel
the regulations adopted under subdivision (d) of Section 10112.25.

(2) The commissioner may also adopt emergency regulations
in accordance with the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code) as necessary to implement this section.
The initial adoption of the emergency regulations shall be deemed
to be an emergency and necessary for the immediate preservation
of the public peace, health, safety, or general welfare. The
emergency regulations shall be parallel to any emergency
regulations adopted pursuant to subdivision (d) of Section
10112.25.

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

begin insert

(e) Nothing in this section shall be construed to apply to
disability insurance for covered benefits in the single specialized
area of dental-only health care that pays benefits on a fixed benefit,
cash payment only basis.

end insert begin delete

(e)

end delete

begin insert (f) end insert  Nothing in this section shall be construed to apply to a health
care service plan contract or insurance policy issued, sold, renewed,
or offered for health care services or coverage provided in the
Medi-Cal program (Chapter 7 (commencing with Section 14000)
of Part 3 of Division 9 of the Welfare and Institutions Code), the
Healthy Families Program (Part 6.2 (commencing with Section
12693) of Division 2 of the Insurance Code), the Access for Infants
and Mothers Program (Part 6.3 (commencing with Section 12695)
of Division 2 of the Insurance Code), the California Major Risk
Medical Insurance Program (Part 6.5 (commencing with Section
12700) of Division 2 of the Insurance Code), or the Federal
Temporary High Risk Pool (Part 6.6 (commencing with Section
12739.5) of Division 2 of the Insurance Code).

SEC. 5.  

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.