SB 161, as introduced, Hernandez. Stop-loss insurance coverage.
Existing law prohibits a person from transacting any class of insurance business, including health insurance, in this state without first being an admitted insurer. Under existing law, admission is secured by procuring a certificate of authority from the Insurance Commissioner. Existing law prohibits a health insurance policy from being issued or delivered to any person in this state unless specified requirements have been met, including that a copy of the form and premium rates are filed with the commissioner. Under existing law, if the commissioner notifies the health insurer that the filed form does not comply with specified requirements, it is unlawful for that health insurer to issue any health insurance policy in that form.
Existing law, with respect to small employer health insurance, requires a carrier providing aggregate or specific stop-loss coverage or any other assumption of risk with reference to a health benefit plan, as defined, to provide that the plan meets specified requirements concerning preexisting condition provisions, waiting or affiliation periods, and late enrollees.
Existing law, the federal Patient Protection and Affordable Care Act (PPACA), commencing January 1, 2014, prohibits a group health plan and a health insurance issuer offering group or individual health insurance coverage from imposing any preexisting condition exclusion with respect to the plan or coverage.
This bill would require a stop-loss carrier, as defined, to offer coverage to all employees and dependents of a small employer to which it issues a stop-loss insurance policy and would prohibit the carrier from excluding any employee or dependent on the basis of actual or expected health status-related factors, as specified. Except as specified, the bill would require a stop-loss carrier to renew, at the option of the small employer, all stop-loss insurance policies. The bill would prohibit a stop-loss insurance policy issued on or after January 1, 2014, to a small employer from containing certain individual or aggregate attachment points for a policy year or providing direct coverage, as defined, of an employee’s health claims. The bill would make a stop-loss carrier in violation of these provisions subject to administrative penalties and would require those fine and penalty moneys to be deposited in the General Fund and be available upon appropriation by the Legislature.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
Article 5 (commencing with Section 10752) is
2added to Chapter 8 of Part 2 of Division 2 of the Insurance Code,
As used in this article, the following definitions shall
9(a) “Attachment point” means the amount of health claims
10incurred by a small employer in a policy year for its employees
11and their dependents above which the stop-loss carrier incurs a
12liability for payment.
13(1) “Individual attachment point” means the amount of health
14claims incurred by a small employer in a policy year for an
15individual employee or dependent of an employee above which
16the stop-loss carrier incurs a liability for payment. For purposes
17of this article, “specific attachment point” has the same meaning
18as “individual attachment point.”
19(2) “Aggregate attachment
point” means the amount of health
20claims incurred by a small employer in a policy year for all covered
P3 1employees and their dependents above which the stop-loss carrier
2incurs a liability for payment.
3(b) “Dependent” means the spouse, registered domestic partner
4as described in Section 297 of the Family Code, or child of an
6(c) “Direct coverage” means that an insurance company assumes
7a direct obligation to an employee under an insurance policy to
8pay or indemnify the employee for health claims incurred by the
9employee or the employee’s dependents.
10(d) “Expected claims” means the total amount of health claims
11that, in the absence of a stop-loss insurance policy or other
12insurance, are projected to be incurred by a small employer for its
13employees and their dependents.
14(e) “Policy year” means the 12-month period that is designated
15as the policy year for the stop-loss insurance policy. If the stop-loss
16insurance policy does not designate a policy year, the policy year
17is the year in which the total amount of health claims incurred by
18a small employer for an individual employee or dependent of an
19employee, or the aggregate amount for all covered employees and
20their dependents, are added together for the purposes of
21determining whether the amount of claims has exceeded the
23(f) “Small employer” has the same meaning as defined in
24subdivision (w) of Section 10700.
25(g) “Stop-loss carrier” means an insurance company or other
26entity providing individual or aggregate stop-loss insurance
27coverage, or any other assumption of risk, to a small employer for
28the health claims of its employees and their dependents, regardless
29of the situs of the contract or master policyholder.
30(h) “Stop-loss insurance policy” means a policy, contract,
31certificate, or statement of coverage between a stop-loss carrier
32and small employer providing individual or aggregate stop-loss
33insurance coverage, or any other assumption of risk, to a small
34employer for the health claims of its employees and their
35dependents, regardless of the situs of the contract or master
A stop-loss carrier shall offer coverage to all
38employees and dependents of employees of a small employer to
39which it issues a stop-loss insurance policy and shall not exclude
40any employee or dependent on the basis of an actual or expected
P4 1health status-related factor. Health status-related factors include,
2but are not limited to, any of the following: health status; medical
3condition, including both physical and mental illnesses; claims
4experience; medical history; receipt of health care; genetic
5information; disability; evidence of insurability, including
6conditions arising out of acts of domestic violence of the employee
7or dependent; or any other health status-related factor as determined
8by the department.
A stop-loss carrier shall renew, at the option of the
10small employer, all stop-loss insurance policies written, issued,
11administered, or renewed on or after January 1, 2014, and all
12stop-loss insurance policies in force on or after the January 1, 2014,
13except as follows:
14(a) (1) For nonpayment of the required premiums by the small
15employer, if the small employer has been duly notified and billed
16for the charge and at least a 30-day grace period has elapsed since
17the date of notification or, if longer, the period of time required
18for notice and any other requirements pursuant to Section 2703,
192712, or 2742 of the federal Public Health Service Act (42 U.S.C.
20Sec. 300gg-2, 300gg-12, or 300gg-42) and any subsequent rules
21or regulations has elapsed.
22(2) A stop-loss carrier shall continue to provide coverage as
23required by the small employer’s policy during the grace period
24described in paragraph (1). This section does not affect or impair
25the small employer’s or carrier’s other rights and responsibilities
26pursuant to the policy.
27(b) If the stop-loss carrier demonstrates fraud or an intentional
28misrepresentation of material fact by the small employer under
29the terms of the stop-loss insurance policy.
30(c) If the stop-loss carrier has been determined by the
31commissioner to be financially impaired.
32(d) If the stop-loss carrier ceases to write, issue, or administer
33new stop-loss insurance policies in this state; provided, however,
34that the following conditions are satisfied:
35(1) Notice of the decision to cease writing, issuing, or
36administering new or existing stop-loss insurance policies in this
37state is provided to the commissioner, and to the small employer,
38at least 180 days prior to the discontinuation of the coverage.
39(2) Stop-loss insurance policies subject to this article shall not
40be canceled until 180 days after the date of the notice required
P5 1under paragraph (1). During that time, the stop-loss carrier shall
2continue to comply with this article.
No stop-loss insurance policy issued on or after
4January 1, 2014, to a small employer shall contain any of the
6(a) An individual attachment point for a policy year that is less
7than ninety-five thousand dollars ($95,000).
8(b) An aggregate attachment point for a policy year that is less
9than the greater of one of the following:
10(1) Nineteen thousand dollars ($19,000) times the total number
11of covered employees and dependents.
12(2) One hundred twenty percent of expected claims.
13(3) Ninety-five thousand dollars ($95,000).
14(c) A provision for direct coverage of an employee’s health
The commissioner may adopt regulations as may be
17necessary to carry out the purposes of this article. In adopting
18regulations, the commissioner shall comply with Chapter 3.5
19(commencing with Section 11340) of Part 1 of Division 3 of Title
202 of the Government Code.
A stop-loss carrier that violates the provisions of this
22article is subject to the remedies and administrative penalties
23applicable to carriers in Sections 10718 and 10718.5. All fine and
24penalty moneys received pursuant to this section shall be deposited
25in the General Fund and shall be available for expenditure by the
26commissioner upon appropriation by the Legislature.
The provisions of this article are severable. If any
28provision of this article or its application is held invalid, that
29invalidity shall not affect other provisions or applications that can
30be given effect without the invalid provision or application.