BILL NUMBER: SB 161 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Hernandez
FEBRUARY 1, 2013
An act to add Article 5 (commencing with Section 10752) to Chapter
8 of Part 2 of Division 2 of the Insurance Code, relating to
insurance.
LEGISLATIVE COUNSEL'S DIGEST
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:
SECTION 1. Article 5 (commencing with Section 10752) is added to
Chapter 8 of Part 2 of Division 2 of the Insurance Code, to read:
Article 5. Stop-Loss Insurance
10752. As used in this article, the following definitions shall
apply:
(a) "Attachment point" means the amount of health claims incurred
by a small employer in a policy year for its employees and their
dependents above which the stop-loss carrier incurs a liability for
payment.
(1) "Individual attachment point" means the amount of health
claims incurred by a small employer in a policy year for an
individual employee or dependent of an employee above which the
stop-loss carrier incurs a liability for payment. For purposes of
this article, "specific attachment point" has the same meaning as
"individual attachment point."
(2) "Aggregate attachment point" means the amount of health claims
incurred by a small employer in a policy year for all covered
employees and their dependents above which the stop-loss carrier
incurs a liability for payment.
(b) "Dependent" means the spouse, registered domestic partner as
described in Section 297 of the Family Code, or child of an employee.
(c) "Direct coverage" means that an insurance company assumes a
direct obligation to an employee under an insurance policy to pay or
indemnify the employee for health claims incurred by the employee or
the employee's dependents.
(d) "Expected claims" means the total amount of health claims
that, in the absence of a stop-loss insurance policy or other
insurance, are projected to be incurred by a small employer for its
employees and their dependents.
(e) "Policy year" means the 12-month period that is designated as
the policy year for the stop-loss insurance policy. If the stop-loss
insurance policy does not designate a policy year, the policy year is
the year in which the total amount of health claims incurred by a
small employer for an individual employee or dependent of an
employee, or the aggregate amount for all covered employees and their
dependents, are added together for the purposes of determining
whether the amount of claims has exceeded the attachment point.
(f) "Small employer" has the same meaning as defined in
subdivision (w) of Section 10700.
(g) "Stop-loss carrier" means an insurance company or other entity
providing individual or aggregate stop-loss insurance coverage, or
any other assumption of risk, to a small employer for the health
claims of its employees and their dependents, regardless of the situs
of the contract or master policyholder.
(h) "Stop-loss insurance policy" means a policy, contract,
certificate, or statement of coverage between a stop-loss carrier and
small employer providing individual or aggregate stop-loss insurance
coverage, or any other assumption of risk, to a small employer for
the health claims of its employees and their dependents, regardless
of the situs of the contract or master policyholder.
10752.1. A stop-loss carrier shall offer coverage to all
employees and dependents of employees of a small employer to which it
issues a stop-loss insurance policy and shall not exclude any
employee or dependent on the basis of an actual or expected health
status-related factor. Health status-related factors include, but are
not limited to, any of the following: health status; medical
condition, including both physical and mental illnesses; claims
experience; medical history; receipt of health care; genetic
information; disability; evidence of insurability, including
conditions arising out of acts of domestic violence of the employee
or dependent; or any other health status-related factor as determined
by the department.
10752.2. A stop-loss carrier shall renew, at the option of the
small employer, all stop-loss insurance policies written, issued,
administered, or renewed on or after January 1, 2014, and all
stop-loss insurance policies in force on or after the January 1,
2014, except as follows:
(a) (1) For nonpayment of the required premiums by the small
employer, if the small employer has been duly notified and billed for
the charge and at least a 30-day grace period has elapsed since the
date of notification or, if longer, the period of time required for
notice and any other requirements pursuant to Section 2703, 2712, or
2742 of the federal Public Health Service Act (42 U.S.C. Sec.
300gg-2, 300gg-12, or 300gg-42) and any subsequent rules or
regulations has elapsed.
(2) A stop-loss carrier shall continue to provide coverage as
required by the small employer's policy during the grace period
described in paragraph (1). This section does not affect or impair
the small employer's or carrier's other rights and responsibilities
pursuant to the policy.
(b) If the stop-loss carrier demonstrates fraud or an intentional
misrepresentation of material fact by the small employer under the
terms of the stop-loss insurance policy.
(c) If the stop-loss carrier has been determined by the
commissioner to be financially impaired.
(d) If the stop-loss carrier ceases to write, issue, or administer
new stop-loss insurance policies in this state; provided, however,
that the following conditions are satisfied:
(1) Notice of the decision to cease writing, issuing, or
administering new or existing stop-loss insurance policies in this
state is provided to the commissioner, and to the small employer, at
least 180 days prior to the discontinuation of the coverage.
(2) Stop-loss insurance policies subject to this article shall not
be canceled until 180 days after the date of the notice required
under paragraph (1). During that time, the stop-loss carrier shall
continue to comply with this article.
10752.3. No stop-loss insurance policy issued on or after January
1, 2014, to a small employer shall contain any of the following
provisions:
(a) An individual attachment point for a policy year that is less
than ninety-five thousand dollars ($95,000).
(b) An aggregate attachment point for a policy year that is less
than the greater of one of the following:
(1) Nineteen thousand dollars ($19,000) times the total number of
covered employees and dependents.
(2) One hundred twenty percent of expected claims.
(3) Ninety-five thousand dollars ($95,000).
(c) A provision for direct coverage of an employee's health
claims.
10752.4. The commissioner may adopt regulations as may be
necessary to carry out the purposes of this article. In adopting
regulations, the commissioner shall comply with Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code.
10752.5. A stop-loss carrier that violates the provisions of this
article is subject to the remedies and administrative penalties
applicable to carriers in Sections 10718 and 10718.5. All fine and
penalty moneys received pursuant to this section shall be deposited
in the General Fund and shall be available for expenditure by the
commissioner upon appropriation by the Legislature.
10752.6. The provisions of this article are severable. If any
provision of this article or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.