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, reissued, or renewed on or after January 1, 2014, and prior to January 1, 2016, except as provided, 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 require a stop-loss insurer to report to the Department of Insurance, on April 1, 2014, and annually thereafter, the number of small employer stop-loss policies it had issued and in effect in the previous year, as specified. 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
P3 1(a) “Attachment point” means the amount of health claims
2incurred by a small employer in a policy year for its employees
3and their dependents, and covered by a stop-loss insurance policy,
4above which the stop-loss insurer incurs a liability for payment.
5(1) “Individual attachment point” means the amount of health
6claims incurred by a small employer in a policy year for an
7individual employee or dependent of an employee, and covered
8by a stop-loss insurance policy, above which the stop-loss insurer
9incurs a liability for payment, under individual stop-loss coverage.
10 For purposes of this article, “specific attachment point” has the
11same meaning as “individual attachment point.”
12(2) “Aggregate attachment point” means the total amount of
13health claims incurred by a small employer in a policy year for all
14covered employees and their dependents, and covered by a
15stop-loss insurance policy, above which the stop-loss insurer incurs
16a liability for payment under aggregate stop-loss coverage.
17(b) “Dependent” means the spouse, registered domestic partner
18as described in Section 297 of the Family Code, or child of an
20(c) “Direct coverage” means that an insurance company assumes
21a direct obligation to an employee under an insurance policy to
22pay or indemnify the employee for health claims incurred by the
23employee or the employee’s dependents.
24(d) “Expected claims” means, for the purposes of aggregate
25stop-loss coverage, the total amount of health claims that is
26projected to be incurred by a small employer for its employees
27and their dependents in a policy year.
28(e) “Policy year” means the 12-month period that is designated
29as the policy year or policy period for the stop-loss insurance
30policy. If the stop-loss insurance policy does not designate a policy
31year, the policy year is the year in which the total amount of health
32claims incurred by a small employer for an individual employee
33or dependent of an employee, or the aggregate amount for all
34covered employees and their dependents, are added together for
35the purposes of determining whether the claims have exceeded the
37(f) “Small employer” has the same meaning as defined in
38subdivision (q) of Section 10753.
39(g) “Stop-loss insurer” means an insurance company providing
40individual or aggregate stop-loss insurance coverage, or both, or
P4 1any other assumption of risk, to a small employer for the health
2claims it incurs for its employees and their dependents.
3(h) “Stop-loss insurance policy” means a policy, contract,
4certificate, or statement of coverage between a stop-loss insurer
5and small employer providing individual or aggregate stop-loss
6insurance coverage, or both, or any other assumption of risk, to a
7small employer for the liability the small employer incurs related
8to the covered health claims of its employees and their dependents.
A stop-loss insurer shall not exclude any employee
10or dependent on the basis of an actual or expected health
11status-related factor. Health status-related factors include, but are
12not limited to, any of the following: health status; medical
13condition, including both physical and mental illnesses; claims
14experience; medical history; receipt of health care; genetic
15information; disability; evidence of insurability, including
16conditions arising out of acts of domestic violence of the employee
17or dependent; or any other health status-related factor as determined
18by the department.
A stop-loss insurer shall renew, at the option of the
20small employer, all stop-loss insurance policies written, issued,
21administered, or renewed on or after January 1, 2014, and all small
22employer stop-loss insurance policies in force on or after January
231, 2014, except as follows:
24(a) (1) For nonpayment of the required premiums by the small
25employer, if the small employer has been duly notified and billed
26for the charge and at least a 30-day grace period has elapsed since
27the date of notification.
28(2) A stop-loss insurer shall continue to provide coverage as
29required by the small employer’s policy during the grace period
30described in paragraph (1). Nothing in this section shall be
31construed to affect or impair the small employer’s or the stop-loss
32insurer’s other rights and responsibilities pursuant to the policy.
33(b) Where the stop-loss insurer demonstrates fraud or an
34intentional misrepresentation of material fact by the small employer
35under the terms of the stop-loss insurance policy.
36(c) Where the stop-loss insurer has been determined by the
37commissioner to be financially impaired.
38(d) Where the stop-loss insurer ceases to write, issue, or
39administer new stop-loss insurance policies in this state; provided,
40however, that the following conditions are satisfied:
P5 1(1) Notice of the decision to cease writing, issuing, or
2administering new or existing stop-loss insurance policies in this
3state is provided to the commissioner, and to the small employer,
4at least 180 days prior to the discontinuation of the coverage.
5(2) Stop-loss insurance policies subject to this article shall not
6be canceled until 180 days after the date of the notice required
7under paragraph (1). During that time, the stop-loss insurer shall
8continue to comply with this article.
A stop-loss insurance policy issued, reissued, or
10renewed on or after January 1, 2014, and prior to January 1, 2016,
11to a small employer shall not contain any of the following
13(a) An individual attachment point for a policy year that is less
14than thirty-five thousand dollars ($35,000).
15(b) An aggregate attachment point for a policy year that is less
16than the greater of one of the following:
17(1) Five thousand dollars ($5,000) times the total number of
18 group members.
19(2) One hundred twenty percent of expected claims.
20(3) Thirty-five thousand dollars ($35,000).
21(c) A provision for direct coverage of an employee or dependent
22of an employee.
A stop-loss insurance policy issued, reissued, or
24renewed on or after January 1, 2016, to a small employer shall not
25contain any of the following provisions:
26(a) An individual attachment point for a policy year that is less
27than forty thousand dollars ($40,000).
28(b) An aggregate attachment point for a policy year that is less
29than the greater of one of the following:
30(1) Five thousand dollars ($5,000) times the total number of
31 group members.
32(2) One hundred twenty percent of expected claims.
33(3) Forty thousand dollars ($40,000).
34(c) A provision for direct coverage of an employee or dependent
35of an employee.
Sections 10752.3 and 10752.4 do not apply
begin delete ifend delete a
begin delete insurer is providingend delete insurance to a small
begin delete had a self-insured health planend delete prior to
begin delete 2013, if theend deletestop-loss insurance policy begin delete is
P6 1 renewed or reissued, or issued
2by another stop-loss insurer to maintain continuity of stop-loss
begin delete withend delete the same or higher
7 attachment points that were
begin delete includedend delete in the policy held
8by the small employer prior to September 1, 2013.
On April 1, 2014, and on April 1 annually thereafter,
10a stop-loss insurer shall report to the Department of Insurance the
11number of small employer stop-loss policies it had issued and in
12effect as of December 31 of the previous year. The information
13shall include new policies
begin delete writtenend delete and policies
14 renewed in the previous year for groups that have
begin delete twoend delete to 50
15employees and 51 to 100 employees.
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 insurer that violates the provisions of this
22article is subject to the remedies and administrative penalties
23applicable to insurers in Sections 10718 and 10718.5.
Nothing in this article shall affect the ongoing
25operations of multiple employer welfare arrangements regulated
26pursuant to Article 4.7 (commencing with Section 742.20) of
27Chapter 1 of Part 2 of Division 1 that provide health care benefits
28to their members on a self-funded or partially self-funded basis
29and that comply with small group health reforms.
The provisions of this article are severable. If any
31provision of this article or its application is held invalid, that
32invalidity shall not affect other provisions or applications that can
33be given effect without the invalid provision or application.