SB 161, as amended, 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 an insurer 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 prohibit a stop-loss insurer, as defined, 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 insurer 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 or his or her dependent. The bill would make a stop-loss insurer in violation of these provisions subject to administrative penalties and would prohibit the act from affecting the ongoing operations of multiple employer welfare arrangements that provide health care benefits to their members on a self-funded or partially self-funded basis and that comply with small group health reforms.
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
P3 1and their dependents, and covered by a stop-loss insurance policy,
2above which the stop-loss insurer incurs a liability for payment.
3(1) “Individual attachment point” means the amount of health
4claims incurred by a small employer in a policy year for an
5individual employee or dependent of an employee, and covered
6by a stop-loss insurance policy, above which the stop-loss insurer
7incurs a liability for payment, under individual stop-loss coverage.
8 For purposes of this article, “specific attachment point” has the
9same meaning as “individual attachment point.”
10(2) “Aggregate attachment point” means the total amount of
11health claims incurred by a small employer in a policy year for all
12covered employees and their dependents, and covered by a
13stop-loss insurance policy, above which the stop-loss insurer incurs
14a liability for payment under aggregate stop-loss coverage.
15(b) “Dependent” means the spouse, registered domestic partner
16as described in Section 297 of the Family Code, or child of an
18(c) “Direct coverage” means that an insurance company assumes
19a direct obligation to an employee under an insurance policy to
20pay or indemnify the employee for health claims incurred by the
21employee or the employee’s dependents.
22(d) “Expected claims” means, for the purposes of aggregate
23stop-loss coverage, the total amount of health claims that is
24projected to be incurred by a small employer for its employees
25and their dependents in a policy year.
26(e) “Policy year” means the 12-month period that is designated
27as the policy year or policy period for the stop-loss insurance
28policy. If the stop-loss insurance policy does not designate a policy
29year, the policy year is the year in which the total amount of health
30claims incurred by a small employer for an individual employee
31or dependent of an employee, or the aggregate amount for all
32covered employees and their dependents, are added together for
33the purposes of determining whether the claims have exceeded the
35(f) “Small employer” has the same meaning as defined in
36subdivision (q) of Section 10753.
37(g) “Stop-loss insurer” means an insurance company providing
38individual or aggregate stop-loss insurance coverage, or both, or
39any other assumption of risk, to a small employer for the health
40claims it incurs for its employees and their dependents.
P4 1(h) “Stop-loss insurance policy” means a policy, contract,
2certificate, or statement of coverage between a stop-loss insurer
3and small employer providing individual or aggregate stop-loss
4insurance coverage, or both, or any other assumption of risk, to a
5small employer for the liability the small employer incurs related
6to the covered health claims of its employees and their dependents.
A stop-loss insurer shall not exclude any employee
8or dependent on the basis of an actual or expected health
9status-related factor. Health status-related factors include, but are
10not limited to, any of the following: health status; medical
11condition, including both physical and mental illnesses; claims
12experience; medical history; receipt of health care; genetic
13information; disability; evidence of insurability, including
14conditions arising out of acts of domestic violence of the employee
15or dependent; or any other health status-related factor as determined
16by the department.
A stop-loss insurer shall renew, at the option of the
18small employer, all stop-loss insurance policies written, issued,
19administered, or renewed on or after January 1, 2014, and all small
20employer stop-loss insurance policies in force on or after January
211, 2014, except as follows:
22(a) (1) For nonpayment of the required premiums by the small
23employer, if the small employer has been duly notified and billed
24for the charge and at least a 30-day grace period has elapsed since
25the date of notification.
26(2) A stop-loss insurer shall continue to provide coverage as
27required by the small employer’s policy during the grace period
28described in paragraph (1). Nothing in this section shall be
29construed to affect or impair the small employer’s or the stop-loss
30insurer’s other rights and responsibilities pursuant to the policy.
31(b) Where the stop-loss insurer demonstrates fraud or an
32intentional misrepresentation of material fact by the small employer
33under the terms of the stop-loss insurance policy.
34(c) Where the stop-loss insurer has been determined by the
35commissioner to be financially impaired.
36(d) Where the stop-loss insurer ceases to write, issue, or
37administer new stop-loss insurance policies in this state; provided,
38however, that the following conditions are satisfied:
39(1) Notice of the decision to cease writing, issuing, or
40administering new or existing stop-loss insurance policies in this
P5 1state is provided to the commissioner, and to the small employer,
2at least 180 days prior to the discontinuation of the coverage.
3(2) Stop-loss insurance policies subject to this article shall not
4be canceled until 180 days after the date of the notice required
5under paragraph (1). During that time, the stop-loss insurer shall
6continue to comply with this article.
A stop-loss insurance policy issued on or after January 1, 2014, and prior to January 1, 2016,
9to a small employer shall not contain any of the following
11(a) An individual attachment point for a policy year that is less
12than thirty-five thousand dollars ($35,000).
13(b) An aggregate attachment point for a policy year that is less
14than the greater of one of the following:
15(1) Five thousand dollars ($5,000) times the total number of
begin delete covered employees and dependentsend delete.
17(2) One hundred twenty percent of expected claims.
18(3) Thirty-five thousand dollars ($35,000).
19(c) A provision for direct coverage of an employee or dependent
20of an employee.
A stop-loss insurance policy issued on or after January 1, 2016, to a small employer shall not
23contain any of the following provisions:
24(a) An individual attachment point for a policy year that is less
25than forty thousand dollars ($40,000).
26(b) An aggregate attachment point for a policy year that is less
27than the greater of one of the following:
28(1) Five thousand dollars ($5,000) times the total number of
begin delete covered employees and dependentsend delete.
30(2) One hundred twenty percent of expected claims.
31(3) Forty thousand dollars ($40,000).
32(c) A provision for direct coverage of an employee or dependent
33of an employee.
The commissioner may adopt regulations as may be
11necessary to carry out the purposes of this article. In adopting
12regulations, the commissioner shall comply with Chapter 3.5
13(commencing with Section 11340) of Part 1 of Division 3 of Title
142 of the Government Code.
A stop-loss insurer that violates the provisions of this
16article is subject to the remedies and administrative penalties
17applicable to insurers in Sections 10718 and 10718.5.
Nothing in this article shall affect the ongoing
19operations of multiple employer welfare arrangements regulated
20pursuant to Article 4.7 (commencing with Section 742.20) of
21Chapter 1 of Part 2 of Division 1 that provide health care benefits
22to their members on a self-funded or partially self-funded basis
23and that comply with small group health reforms.
The provisions of this article are severable. If any
25provision of this article or its application is held invalid, that
26invalidity shall not affect other provisions or applications that can
27be given effect without the invalid provision or application.