Amended in Assembly September 3, 2013

Amended in Assembly August 6, 2013

Amended in Senate May 28, 2013

Amended in Senate April 9, 2013

Amended in Senate April 1, 2013

Senate Bill No. 639

Introduced by Senator Hernandez

February 22, 2013

An act to amend Section 1367 of, and to add Sections 1367.006, 1367.007, 1367.008, and 1367.009 to, the Health and Safety Code, and to add Sections 10112.28, 10112.29, 10112.295, 10112.297, and 10112.7 to the Insurance Code, relating to health care coverage.

LEGISLATIVE COUNSEL’S DIGEST

SB 639, as amended, Hernandez. Health care coverage.

Existing federal law, the federal Patient Protection and Affordable Care Act (PPACA), enacts various health care coverage market reforms that take effect January 1, 2014. Among other things, PPACA establishes annual limits on deductibles for employer-sponsored plans and defines bronze, silver, gold, and platinum levels of coverage for the nongrandfathered individual and small group markets.

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 also provides for the regulation of health insurers by the Department of Insurance.

This bill would prohibit the deductible under a small employer health care service plan contract or health insurance policy offered, sold, or renewed on or after January 1, 2014, from exceeding $2,000 in the case of a plan contract or policy covering a single individual, or $4,000 in all other cases.

The bill would require, for nongrandfathered products in the individual or small group markets, a health care service plan contract or health insurance policy, except a specialized health insurance policy, that is issued, amended, or renewed on or after January 1, 2014, to provide for a limit on annual out-of-pocket expenses for all covered benefits that meet the definition of essential health benefits, as defined, and would require the contract or policy, for nongrandfathered products in the large group market, to provide that limit for covered benefits, including out-of-network emergency care, to the extent that the limit does not conflict with federal law or guidance, as specified. The bill begin delete would, effective January 1, 2015, apply the above-described provisions to end delete begin insert would prohibit the total annual out-of-pocket maximum for all essential benefits from exceeding that limit for end insert a specialized plan or specialized health insurance policy that offers begin insert or provides end insert an essential health benefit, as specified begin insert , in plan or policy years beginning on or after January 1, 2015 end insert .

begin insert

The bill would provide that in the first plan year or policy year commencing on or after January 1, 2014, to the extent allowed by federal law, for nongrandfathered products in the individual and small group markets, when a plan or insurer uses a separate service provider to administer pediatric oral care benefits, the limit on annual out-of-pocket expenses would be satisfied if the plan or policy complies with a specified out-of-pocket maximum for all other essential health benefits and the separate out-of-pocket maximum for the pediatric oral care benefits does not exceed the out-of-pocket maximum requirements for pediatric dental benefits established for stand-alone dental plans by the California Health Benefit Exchange. The bill would also prohibit a plan or insurer from applying a separate out-of-pocket maximum to mental health or substance use disorder benefits.

end insert

The bill would define bronze, silver, gold, and platinum levels of coverage for the nongrandfathered individual and small group markets consistent with the definitions in PPACA. The bill would prohibit a carrier that is not participating in the Exchange from offering a catastrophic plan, as defined, in the individual market.

PPACA requires a health insurance issuer offering group or individual coverage that provides or covers benefits with respect to services in the emergency department of a hospital to cover emergency services without the need for prior authorization, regardless of whether the provider is a participating provider, and subject to the same cost sharing required if the services were provided by a participating provider, as specified.

This bill would impose that requirement with respect to health insurance policies issued, amended, or renewed on or after January 1, 2014, as specified.

Because a willful violation of these requirements with respect to health care service plans 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 of the Health and Safety Code is
amended to read:

1367.  

A health care service plan and, if applicable, a specialized
health care service plan shall meet the following requirements:

(a) Facilities located in this state including, but not limited to,
clinics, hospitals, and skilled nursing facilities to be utilized by
the plan shall be licensed by the State Department of Public Health,
where licensure is required by law. Facilities not located in this
state shall conform to all licensing and other requirements of the
jurisdiction in which they are located.

(b) Personnel employed by or under contract to the plan shall
be licensed or certified by their respective board or agency, where
licensure or certification is required by law.

(c) Equipment required to be licensed or registered by law shall
be so licensed or registered, and the operating personnel for that
equipment shall be licensed or certified as required by law.

(d) The plan shall furnish services in a manner providing
continuity of care and ready referral of patients to other providers
at times as may be appropriate consistent with good professional
practice.

(e) (1) All services shall be readily available at reasonable times
to each enrollee consistent with good professional practice. To the
extent feasible, the plan shall make all services readily accessible
to all enrollees consistent with Section 1367.03.

(2) To the extent that telehealth services are appropriately
provided through telehealth, as defined in subdivision (a) of Section
2290.5 of the Business and Professions Code, these services shall
be considered in determining compliance with Section 1300.67.2
of Title 28 of the California Code of Regulations.

(3) The plan shall make all services accessible and appropriate
consistent with Section 1367.04.

(f) The plan shall employ and utilize allied health manpower
for the furnishing of services to the extent permitted by law and
consistent with good medical practice.

(g) The plan shall have the organizational and administrative
capacity to provide services to subscribers and enrollees. The plan
shall be able to demonstrate to the department that medical
decisions are rendered by qualified medical providers, unhindered
by fiscal and administrative management.

(h) (1) Contracts with subscribers and enrollees, including
group contracts, and contracts with providers, and other persons
furnishing services, equipment, or facilities to or in connection
with the plan, shall be fair, reasonable, and consistent with the
objectives of this chapter. All contracts with providers shall contain
provisions requiring a fast, fair, and cost-effective dispute
resolution mechanism under which providers may submit disputes
to the plan, and requiring the plan to inform its providers upon
contracting with the plan, or upon change to these provisions, of
the procedures for processing and resolving disputes, including
the location and telephone number where information regarding
disputes may be submitted.

(2) A health care service plan shall ensure that a dispute
resolution mechanism is accessible to noncontracting providers
for the purpose of resolving billing and claims disputes.

(3) On and after January 1, 2002, a health care service plan shall
annually submit a report to the department regarding its dispute
resolution mechanism. The report shall include information on the
number of providers who utilized the dispute resolution mechanism
and a summary of the disposition of those disputes.

(i) A health care service plan contract shall provide to
subscribers and enrollees all of the basic health care services
included in subdivision (b) of Section 1345, except that the director
may, for good cause, by rule or order exempt a plan contract or
any class of plan contracts from that requirement. The director
shall by rule define the scope of each basic health care service that
health care service plans are required to provide as a minimum for
licensure under this chapter. Nothing in this chapter shall prohibit
a health care service plan from charging subscribers or enrollees
a copayment or a deductible for a basic health care service
consistent with Section 1367.006 or 1367.007, provided that the
copayments, deductibles, or other cost sharing are reported to the
director and set forth to the subscriber or enrollee pursuant to the
disclosure provisions of Section 1363. Nothing in this chapter shall
prohibit a health care service plan from setting forth, by contract,
limitations on maximum coverage of basic health care services,
provided that the limitations are reported to, and held
unobjectionable by, the director and set forth to the subscriber or
enrollee pursuant to the disclosure provisions of Section 1363.

(j) A health care service plan shall not require registration under
the federal Controlled Substances Act (21 U.S.C. Sec. 801 et seq.)
as a condition for participation by an optometrist certified to use
therapeutic pharmaceutical agents pursuant to Section 3041.3 of
the Business and Professions Code.

Nothing in this section shall be construed to permit the director
to establish the rates charged subscribers and enrollees for
contractual health care services.

The director’s enforcement of Article 3.1 (commencing with
Section 1357) shall not be deemed to establish the rates charged
subscribers and enrollees for contractual health care services.

The obligation of the plan to comply with this chapter shall not
be waived when the plan delegates any services that it is required
to perform to its medical groups, independent practice associations,
or other contracting entities.

SEC. 2.  

Section 1367.006 is added to the Health and Safety
Code, to read:

1367.006.  

(a) (1) For nongrandfathered products in the
individual or small group markets, a health care service plan
contract, except a specialized health care service plan contract,
that is issued, amended, or renewed on or after January 1, 2014,
shall provide for a limit on annual out-of-pocket expenses for all
covered benefits that meet the definition of essential health benefits
in begin delete paragraph (1) of subdivision (a) of end delete Section 1367.005.

begin insert

(A) In the first plan year commencing on or after January 1,
2014, to the extent allowed by federal law, for nongrandfathered
products in the individual and small group markets, when a health
care service plan uses a separate service provider to administer
the pediatric oral care benefits required by Section 1367.005, the
limit on annual out-of-pocket expenses shall be satisfied if both of
the following conditions are met:

end insert begin insert

(i) With respect to all essential health benefits except for the
pediatric oral care benefit, the health care service plan complies
with the out-of-pocket maximum requirements in Section 1302(c)(1)
of PPACA and any federal rules, regulations, and guidance
implementing that section.

end insert begin insert

(ii) The separate out-of-pocket maximum for pediatric oral care
benefits does not exceed the out-of-pocket maximum requirements
for pediatric dental benefits established for stand-alone dental
plans by the California Health Benefit Exchange.

end insert begin insert

(B) The health care service plan shall not apply a separate
out-of-pocket maximum to mental health or substance use disorder
benefits.

end insert

(2) For nongrandfathered products in the large group market, a
health care service plan contract, except a specialized health care
service plan contract, that is issued, amended, or renewed on or
after January 1, 2014, shall provide for a limit on annual
out-of-pocket expenses for covered benefits, including
out-of-network emergency care consistent with Section 1371.4.
This limit shall apply to essential health benefits begin insert , as defined in
Section 1367.005, that are end insert covered under the plan to the extent
that this provision does not conflict with federal law or guidance
on out-of-pocket maximums for nongrandfathered products in the
large group market. For large group products for the first plan year
commencing on or after January 1, 2014, the requirement that a
product provide for a limit on annual out-of-pocket expenses shall
be satisfied if both of the following apply:

(A) The product complies with the requirements of this
paragraph with respect to basic health care services begin insert , as defined in
subdivision (b) of Section 1345, services required under Sections
1374.72 and 1374.73, and any requirements of the Paul Wellstone
and Pete Domenci Mental Health Parity and Addiction Equity Act
of 2008 (Public Law 110-343) end insert .

(B) To the extent the product includes an out-of-pocket
maximum on coverage other than begin delete basic health care services end delete begin insert the
coverage described in subparagraph (A) end insert , that out-of-pocket
maximum also does not exceed the limit established pursuant to
this paragraph.

(b) The limit described in subdivision (a) shall apply to any
copayment, coinsurance, deductible, incentive payment, and any
other form of cost sharing for all covered benefits, including
prescription drugs covered pursuant to Section 1367.24.

(c) The limit described in subdivision (a) shall not exceed the
limit described in Section 1302(c) of PPACA, and any subsequent
rules, regulations, or guidance issued under that section.

(d) Nothing in this section shall be construed to affect the
reduction in cost sharing for eligible enrollees described in Section
1402 of PPACA, and any subsequent rules, regulations, or guidance
issued under that section.

(e)  begin delete Effective end delete begin insert For plan years beginning on or after end insert January 1,
2015, if an essential health benefit is offered begin insert or provided end insert by a
specialized plan, begin delete this section shall apply so that end delete the total annual
out-of-pocket maximum for all essential benefits begin delete does end delete begin insert shall end insert not
exceed the limit in this section. This section shall not apply to a
specialized plan that does not offer an essential health benefit as
defined in Section 1367.005.

begin insert

(f) For nongrandfathered health plan contracts in the group
market, “plan year” has the meaning set forth in Section 144.103
of Title 45 of the Code of Federal Regulations. For
nongrandfathered health plan contracts sold in the individual
market, “plan year” means the calendar year.

end insert begin delete

(f)

end delete

begin insert (g) end insert  “PPACA” means the federal Patient Protection and
Affordable Care Act (Public Law 111-148), as amended by the
federal Health Care and Education Reconciliation Act of 2010
(Public Law 111-152), and any rules, regulations, or guidance
issued thereunder.

SEC. 3.  

Section 1367.007 is added to the Health and Safety
Code, to read:

1367.007.  

(a) (1) For a small employer health care service
plan contract offered, sold, or renewed on or after January 1, 2014,
the deductible under the plan shall not exceed:

(A) Two thousand dollars ($2,000) in the case of a plan contract
covering a single individual.

(B) Four thousand dollars ($4,000) in the case of any other plan
contract.

(2) The dollar amounts in this section shall be indexed consistent
with Section 1302(c)(2) of PPACA and any federal rules or
guidance pursuant to that section.

(3) The limitation in this subdivision shall be applied in a
manner that does not affect the actuarial value of any small
employer health care service plan contract.

(4) For small group products at the bronze level of coverage,
as defined in Section 1367.008, the department may permit plans
to offer a higher deductible in order to meet the actuarial value
requirement of the bronze level. In making this determination, the
department shall consider affordability of cost sharing for enrollees
and shall also consider whether enrollees may be deterred from
seeking appropriate care because of higher cost sharing.

(b) Nothing in this section shall be construed to allow a plan
contract to have a deductible that applies to preventive services as
defined in Section 1367.002.

(c) “PPACA” means the federal Patient Protection and
Affordable Care Act (Public Law 111-148), as amended by the
federal Health Care and Education Reconciliation Act of 2010
(Public Law 111-152), and any rules, regulations, or guidance
issued thereunder.

SEC. 4.  

Section 1367.008 is added to the Health and Safety
Code, to read:

1367.008.  

(a) Levels of coverage for the nongrandfathered
individual market are defined as follows:

(1) Bronze level: A health care service plan contract in the
bronze level shall provide a level of coverage that is actuarially
equivalent to 60 percent of the full actuarial value of the benefits
provided under the plan contract.

(2) Silver level: A health care service plan contract in the silver
level shall provide a level of coverage that is actuarially equivalent
to 70 percent of the full actuarial value of the benefits provided
under the plan contract.

(3) Gold level: A health care service plan contract in the gold
level shall provide a level of coverage that is actuarially equivalent
to 80 percent of the full actuarial value of the benefits provided
under the plan contract.

(4) Platinum level: A health care service plan contract in the
platinum level shall provide a level of coverage that is actuarially
equivalent to 90 percent of the full actuarial value of the benefits
provided under the plan contract.

(b) Actuarial value for nongrandfathered individual health care
service plan contracts shall be determined in accordance with the
following:

(1) Actuarial value shall not vary by more than plus or minus
2 percent.

(2) Actuarial value shall be determined on the basis of essential
health benefits as defined in Section 1367.005 and as provided to
a standard, nonelderly population. For this purpose, a standard
population shall not include those receiving coverage through the
Medi-Cal or Medicare programs.

(3) The department may use the actuarial value methodology
developed consistent with Section 1302(d) of PPACA.

(4) The actuarial value for pediatric dental benefits, whether
offered by a full service plan or a specialized plan, shall be
consistent with federal law and guidance begin insert applicable to the plan
type end insert .

(5) The department, in consultation with the Department of
Insurance and the Exchange, shall consider whether to exercise
state-level flexibility with respect to the actuarial value calculator
in order to take into account the unique characteristics of the
California health care coverage market, including the prevalence
of health care service plans, total cost of care paid for by the plan,
price of care, patterns of service utilization, and relevant
demographic factors.

begin delete

(c) For all products in the nongrandfathered individual market
commencing January 1, 2015, any deductible shall apply to the
same services for any product in the same level of coverage
whether regulated by the department or the Department of
Insurance.

end delete begin delete

(d)

end delete

begin insert (c end insert begin insert ) end insert  (1) A catastrophic plan is a health care service plan contract
that provides no benefits for any plan year until the enrollee has
incurred cost-sharing expenses in an amount equal to the annual
limit on out-of-pocket costs as specified in Section 1367.006 except
that it shall provide coverage for at least three primary care visits.
A carrier that is not participating in the Exchange shall not offer,
market, or sell a catastrophic plan in the individual market.

(2) A catastrophic plan may be offered only in the individual
market and only if consistent with begin delete subdivision (c) and end delete this
paragraph. Catastrophic plans may be offered only if either of the
following apply:

(A) The individual purchasing the plan has not yet attained 30
years of age begin insert before the beginning of the plan year end insert .

(B) The individual has a certificate of exemption from Section
5000(A) of the Internal Revenue Code because the individual is
not offered affordable coverage or because the individual faces
hardship.

begin delete

(e) (1) Nongrandfathered products in the individual market that
are not standardized products as provided under Section 1366.1
shall be subject to review by the department consistent with this
subdivision prior to product approval. This section shall also apply
to carriers offering specialized plans that provide coverage of an
essential health benefit as defined in Section 1367.005.

(2) The department shall publicly post information on
nonstandardized products no less than 60 days prior to the date on
which the product is approved by the department. For purposes of
products offered by the Exchange, the department shall post
nonstandardized products for review 60 days prior to the
finalization of any contract between the Exchange and the health
care service plan.

(3) For each proposed product, the plan shall provide to the
department all of the following:

(A) Information as to whether the product was proposed to the
Exchange and any written information from the Exchange as to
whether the product was approved, denied, or modified.

(B) The estimated actuarial value of the proposed product and
the actuarial value tier of the proposed product.

(C) The anticipated impact on risk mix of plan enrollees
purchasing the proposed product, including information on the
risk mix of enrollees purchasing the same or similar products in
prior years.

(D) Any benefit to consumers, including the anticipated impacts
on premiums.

(4) The department shall review and take public comment on
the nonstandardized products with regard to all of the following:

(A) Whether the proposed product is likely to affect the risk
adjustment scores or reinsurance amounts for the product or health
care service plan.

(B) Whether the consumer will be provided additional or more
comprehensive benefits.

(C) Whether the proposed product has a disproportional impact
on individuals with high health care needs.

(D) The anticipated impact on premiums.

(E) Whether the proposed product is otherwise consistent with
this chapter.

(5) If this product is approved or modified, the approved product
shall be posted.

(f) Nothing in this section shall prohibit a plan from offering
supplemental benefits for services that are not included in essential
health benefits as defined in Section 1367.005, including adult
dental, adult vision, acupuncture, or chiropractic, if the plan
demonstrates to the satisfaction of the director that those benefits
will not affect the risk adjustment scores or the reinsurance amounts
for the product or the plan. For a plan to continue to offer a
supplemental benefit, the plan shall annually provide to the
department information necessary to determine whether the benefit
has affected the risk mix in the prior plan year.

(g)

end delete

begin insert (d end insert begin insert ) end insert  “PPACA” means the federal Patient Protection and
Affordable Care Act (Public Law 111-148), as amended by the
federal Health Care and Education Reconciliation Act of 2010
(Public Law 111-152), and any rules, regulations, or guidance
issued thereunder.

SEC. 5.  

Section 1367.009 is added to the Health and Safety
Code, to read:

1367.009.  

(a) Levels of coverage for the nongrandfathered
small group market are defined as follows:

(1) Bronze level: A health care service plan contract in the
bronze level shall provide a level of coverage that is actuarially
equivalent to 60 percent of the full actuarial value of the benefits
provided under the plan contract.

(2) Silver level: A health care service plan contract in the silver
level shall provide a level of coverage that is actuarially equivalent
to 70 percent of the full actuarial value of the benefits provided
under the plan contract.

(3) Gold level: A health care service plan contract in the gold
level shall provide a level of coverage that is actuarially equivalent
to 80 percent of the full actuarial value of the benefits provided
under the plan contract.

(4) Platinum level: A health care service plan contract in the
platinum level shall provide a level of coverage that is actuarially
equivalent to 90 percent of the full actuarial value of the benefits
provided under the plan contract.

(b) Actuarial value for nongrandfathered small employer health
care service plan contracts shall be determined in accordance with
the following:

(1) Actuarial value shall not vary by more than plus or minus
2 percent.

(2) Actuarial value shall be determined on the basis of essential
health benefits as defined in Section 1367.005 and as provided to
a standard, nonelderly population. For this purpose, a standard
population shall not include those receiving coverage through the
Medi-Cal or Medicare programs.

(3) The department may use the actuarial value methodology
developed consistent with Section 1302(d) of PPACA.

(4) The actuarial value for pediatric dental benefits, whether
offered by a full service plan or a specialized plan, shall be
consistent with federal law and guidance begin insert applicable to the plan
type end insert .

(5) The department, in consultation with the Department of
Insurance and the Exchange, shall consider whether to exercise
state-level flexibility with respect to the actuarial value calculator
in order to take into account the unique characteristics of the
California health care coverage market, including the prevalence
of health care service plans, total cost of care paid for by the plan,
price of care, patterns of service utilization, and relevant
demographic factors.

(6) Employer contributions toward health reimbursement
accounts and health savings accounts shall count toward the
actuarial value of the product in the manner specified in federal
rules and guidance.

begin delete

(c) For all products in the nongrandfathered small group market
commencing January 1, 2015, any deductible shall apply to the
same services for any product in the same level of coverage
whether regulated by the department or the Department of
Insurance.

(d)

end delete

begin insert (c) end insert  “PPACA” means the federal Patient Protection and
Affordable Care Act (Public Law 111-148), as amended by the
federal Health Care and Education Reconciliation Act of 2010
(Public Law 111-152), and any rules, regulations, or guidance
issued thereunder.

SEC. 6.  

Section 10112.28 is added to the Insurance Code, to
read:

10112.28.  

(a) (1) For nongrandfathered products in the
individual or small group markets, a health insurance policy, except
a specialized health insurance policy, that is issued, amended, or
renewed on or after January 1, 2014, shall provide for a limit on
annual out-of-pocket expenses for all covered benefits that meet
the definition of essential health benefits in begin delete paragraph (1) of
subdivision (a) of end delete Section 10112.27.

begin insert

(A) In the first policy year commencing on or after January 1,
2014, to the extent allowed by federal law, for nongrandfathered
health insurance policies in the individual and small group
markets, when an insurer uses a separate service provider to
administer the pediatric oral care benefits required by Section
10112.27, the limit on annual out-of-pocket expenses shall be
satisfied if both of the following conditions are met:

end insert begin insert

(i) With respect to all essential health benefits except for the
pediatric oral care benefit, the insurer complies with the
out-of-pocket maximum requirements in Section 1302(c)(1) of
PPACA and any federal rules, regulations, and guidance
implementing that section.

end insert begin insert

(ii) The separate out-of-pocket maximum for pediatric oral care
benefits does not exceed the out-of-pocket maximum requirements
for pediatric dental benefits established for stand-alone dental
policies by the California Health Benefit Exchange.

end insert begin insert

(B) The insurer shall not apply a separate out-of-pocket
maximum to mental health or substance use disorder benefits.

end insert

(2) For nongrandfathered products in the large group market, a
health insurance policy, except a specialized health insurance
policy, that is issued, amended, or renewed on or after January 1,
2014, shall provide for a limit on annual out-of-pocket expenses
for covered benefits, including out-of-network emergency care.
This limit shall apply to essential health benefits begin insert , as defined in
Section 10112.27, that are end insert covered under the policy to the extent
that this provision does not conflict with federal law or guidance
on out-of-pocket maximums for nongrandfathered products in the
large group market. For large group products for the first plan year
commencing on or after January 1, 2014, the requirement that a
product provide for a limit on annual out-of-pocket expenses shall
be satisfied if both of the following apply:

(A) The product complies with the requirements of this
paragraph with respect to basic health care services begin insert , as defined in
Sections 10112.27, 10144.05, 10144.51, and any requirements of
the Paul Wellstone and Pete Domenci Mental Health Parity and
Addiction Equity Act of 2008 (Public Law 110-343) end insert .

(B) To the extent the product includes an out-of-pocket
maximum on coverage other than begin delete basic health care services end delete begin insert the
coverage described in subparagraph (A) end insert , that out-of-pocket
maximum also does not exceed the limit established pursuant to
this paragraph.

(b) The limit described in subdivision (a) shall apply to any
copayment, coinsurance, deductible, incentive payment and any
other form of cost sharing for all covered benefits, including
nonformulary prescription drugs that are authorized as medically
necessary.

(c) The limit described in subdivision (a) shall not exceed the
limit described in Section 1302(c) of PPACA and any subsequent
rules, regulations, or guidance issued under that section.

(d) Nothing in this section shall be construed to affect the
reduction in cost sharing for eligible enrollees described in Section
1402 of PPACA and any subsequent rules, regulations, or guidance
issued under that section.

(e)  begin delete Effective end delete begin insert For policy years beginning on or after end insert January 1,
2015, if an essential health benefit is offered begin insert or provided end insert by a
specialized health insurance policy, begin delete this section shall apply so that end delete
the total annual out-of-pocket maximum for all essential benefits
begin delete does end delete begin insert shall end insert not exceed the limit in this section. This section shall
not apply to a specialized policy that does not offer an essential
health benefit as defined in Section begin delete 1367.005 end delete begin insert 10112.28 end insert .

begin insert

(f) For nongrandfathered health insurance policies in the group
market, “policy year” has the meaning set forth in Section 144.103
of Title 45 of the Code of Federal Regulations. For
nongrandfathered health insurance policies sold in the individual
market, “policy year” means the calendar year.

end insert begin delete

(f)

end delete

begin insert (g end insert begin insert ) end insert  “PPACA” means the federal Patient Protection and
Affordable Care Act (Public Law 111-148), as amended by the
federal Health Care and Education Reconciliation Act of 2010
(Public Law 111-152), and any rules, regulations, or guidance
issued thereunder.

SEC. 7.  

Section 10112.29 is added to the Insurance Code, to
read:

10112.29.  

(a) (1) For a small employer health insurance policy
offered, sold, or renewed on or after January 1, 2014, the deductible
under the policy shall not exceed:

(A) Two thousand dollars ($2,000) in the case of a policy
covering a single individual.

(B) Four thousand dollars ($4,000) in the case of any other
policy.

(2) The dollar amounts in this section shall be indexed consistent
with Section 1302(c)(2) of PPACA and any federal rules or
guidance pursuant to that section.

(3) The limitation in this subdivision shall be applied in a
manner that does not affect the actuarial value of any small
employer health insurance policy.

(4) For small group products at the bronze level of coverage,
as defined in Section 10112.295, the department may permit
insurers to offer a higher deductible in order to meet the actuarial
value requirement of the bronze level. In making this
determination, the department shall consider affordability of cost
sharing for insureds and shall also consider whether insureds may
be deterred from seeking appropriate care because of higher cost
sharing.

(b) Nothing in this section shall be construed to allow a policy
to have a deductible that applies to preventive services as defined
in PPACA.

(c) “PPACA” means the federal Patient Protection and
Affordable Care Act (Public Law 111-148), as amended by the
federal Health Care and Education Reconciliation Act of 2010
(Public Law 111-152), and any rules, regulations, or guidance
issued thereunder.

SEC. 8.  

Section 10112.295 is added to the Insurance Code, to
read:

10112.295.  

(a) Levels of coverage for the nongrandfathered
individual market are defined as follows:

(1) Bronze level: A health insurance policy in the bronze level
shall provide a level of coverage that is actuarially equivalent to
60 percent of the full actuarial value of the benefits provided under
the policy.

(2) Silver level: A health insurance policy in the silver level
shall provide a level of coverage that is actuarially equivalent to
70 percent of the full actuarial value of the benefits provided under
the policy.

(3) Gold level: A health insurance policy in the gold level shall
provide a level of coverage that is actuarially equivalent to 80
percent of the full actuarial value of the benefits provided under
the policy.

(4) Platinum level: A health insurance policy in the platinum
level shall provide a level of coverage that is actuarially equivalent
to 90 percent of the full actuarial value of the benefits provided
under the policy.

(b) Actuarial value for nongrandfathered individual health
insurance policies shall be determined in accordance with the
following:

(1) Actuarial value shall not vary by more than plus or minus
2 percent.

(2) Actuarial value shall be determined on the basis of essential
health benefits as defined in Section 10112.27 and as provided to
a standard, nonelderly population. For this purpose, a standard
population shall not include those receiving coverage through the
Medi-Cal or Medicare programs.

(3) The department may use the actuarial value methodology
developed consistent with Section 1302(d) of PPACA.

(4) The actuarial value for pediatric dental benefits, whether
offered by a major medical policy or a specialized health insurance
policy, shall be consistent with federal law and guidance begin insert applicable
to the policy type end insert .

(5) The department, in consultation with the Department of
Managed Health Care and the Exchange, shall consider whether
to exercise state-level flexibility with respect to the actuarial value
calculator in order to take into account the unique characteristics
of the California health care coverage market, including the
prevalence of health insurance policies, total cost of care paid for
by the health insurer, price of care, patterns of service utilization,
and relevant demographic factors.

begin delete

(c) For all products in the nongrandfathered individual market
commencing January 1, 2015, any deductible shall apply to the
same services for any product in the same level of coverage
whether regulated by the department or the Department of Managed
Health Care.

end delete begin delete

(d)

end delete

begin insert (c end insert begin insert ) end insert  (1) A catastrophic policy is a health insurance policy that
provides no benefits for any plan year until the insured has incurred
cost-sharing expenses in an amount equal to the annual limit on
out-of-pocket costs as specified in Section 10112.28 except that
it shall provide coverage for at least three primary care visits. A
carrier that is not participating in the Exchange shall not offer,
market, or sell a catastrophic plan in the individual market.

(2) A catastrophic policy may be offered only in the individual
market and only if consistent with begin delete subdivision (c) and end delete this
paragraph. Catastrophic policies may be offered only if either of
the following apply:

(A) The individual purchasing the policy has not yet attained
30 years of age begin insert before the beginning of the plan year end insert .

(B) The individual has a certificate of exemption from Section
5000(A) of the Internal Revenue Code because the individual is
not offered affordable coverage or because the individual faces
hardship.

begin delete

(e) (1) Nongrandfathered products in the individual market that
are not standardized products as provided under Section 10112.3
shall be subject to review by the department consistent with this
subdivision prior to product approval. This section shall also apply
to carriers offering specialized health insurance policies that
provide coverage of an essential health benefit as defined in Section
10112.27.

(2) The department shall publicly post information on
nonstandardized products no less than 60 days prior to the date on
which the product is approved by the department. For purposes of
products offered by the Exchange, the department shall post
nonstandardized products for review 60 days prior to the
finalization of any contract between the Exchange and the health
insurer or carrier offering a specialized health insurance policy.

(3) For each proposed product, the insurer shall provide to the
department all of the following:

(A) Information as to whether the product was proposed to the
Exchange and any written information from the Exchange as to
whether the product was approved, denied, or modified.

(B) The estimated actuarial value of the proposed product and
the actuarial value tier of the proposed product.

(C) The anticipated impact on risk mix of insureds purchasing
the proposed product, including information on the risk mix of
insureds purchasing the same or similar products in prior years.

(D) Any benefit to consumers, including the anticipated impacts
on premiums.

(4) The department shall review and take public comment on
the nonstandardized products with regard to all of the following:

(A) Whether the proposed product is likely to affect the risk
adjustment scores or reinsurance amounts for the product or the
health insurance policy.

(B) Whether the consumer will be provided additional or more
comprehensive benefits.

(C) Whether the proposed product has a disproportional impact
on individuals with high health care needs.

(D) The anticipated impact on premiums.

(E) Whether the proposed product is otherwise consistent with
this chapter.

(5) If this product is approved or modified, the approved product
shall be posted.

(f) Nothing in this section shall prohibit an insurer under a health
insurance policy from offering supplemental benefits for services
that are not included in essential health benefits as defined in
paragraph (1) of subdivision (a) of Section 10112.27, including
adult dental, adult vision, acupuncture, or chiropractic, if the insurer
demonstrates to the satisfaction of the commissioner that those
benefits will not affect the risk adjustment scores or the reinsurance
amounts for the product or the policy. For an insurer to continue
to offer a supplemental benefit, the insurer shall annually provide
to the department information necessary to determine whether the
benefit has affected the risk mix in the prior policy year.

(g)

end delete

begin insert (d end insert begin insert ) end insert  “PPACA” means the federal Patient Protection and
Affordable Care Act (Public Law 111-148), as amended by the
federal Health Care and Education Reconciliation Act of 2010
(Public Law 111-152), and any rules, regulations, or guidance
issued thereunder.

SEC. 9.  

Section 10112.297 is added to the Insurance Code, to
read:

10112.297.  

(a) Levels of coverage for the nongrandfathered
small group market are defined as follows:

(1) Bronze level: A health insurance policy in the bronze level
shall provide a level of coverage that is actuarially equivalent to
60 percent of the full actuarial value of the benefits provided under
the policy.

(2) Silver level: A health insurance policy in the silver level
shall provide a level of coverage that is actuarially equivalent to
70 percent of the full actuarial value of the benefits provided under
the policy.

(3) Gold level: A health insurance policy in the gold level shall
provide a level of coverage that is actuarially equivalent to 80
percent of the full actuarial value of the benefits provided under
the policy.

(4) Platinum level: A health insurance policy in the platinum
level shall provide a level of coverage that is actuarially equivalent
to 90 percent of the full actuarial value of the benefits provided
under the policy.

(b) Actuarial value for nongrandfathered small employer health
insurance policies shall be determined in accordance with the
following:

(1) Actuarial value shall not vary by more than plus or minus
2 percent.

(2) Actuarial value shall be determined on the basis of essential
health benefits as defined in paragraph (1) of subdivision (a) of
Section 10112.27 and as provided to a standard, nonelderly
population. For this purpose, a standard population shall not include
those receiving coverage through the Medi-Cal or Medicare
programs.

(3) The department may use the actuarial value methodology
developed consistent with Section 1302(d) of PPACA.

(4) The actuarial value for pediatric dental benefits, whether
offered by a major medical policy or a specialized health insurance
policy, shall be consistent with federal law and guidance begin insert applicable
to the policy type end insert .

(5) The department, in consultation with the Department of
Managed Health Care and the Exchange, shall consider whether
to exercise state-level flexibility with respect to the actuarial value
calculator in order to take into account the unique characteristics
of the California health care coverage market, including the
prevalence of health insurance policies, total cost of care paid for
by the health insurer, price of care, patterns of service utilization,
and relevant demographic factors.

(6) Employer contributions toward health reimbursement
accounts and health savings accounts shall count toward the
actuarial value of the product in the manner specified in federal
rules and guidance.

begin delete

(c) For all products in the nongrandfathered small group market
commencing January 1, 2015, any deductible shall apply to the
same services for any product in the same level of coverage
whether regulated by the department or the Department of Managed
Health Care.

(d)

end delete

begin insert (c end insert begin insert ) end insert  “PPACA” means the federal Patient Protection and
Affordable Care Act (Public Law 111-148), as amended by the
federal Health Care and Education Reconciliation Act of 2010
(Public Law 111-152), and any rules, regulations, or guidance
issued thereunder.

SEC. 10.  

Section 10112.7 is added to the Insurance Code, to
read:

10112.7.  

(a) A group or individual health insurance policy
issued, amended, or renewed on or after January 1, 2014, that
provides or covers any benefits with respect to services in an
emergency department of a hospital shall cover emergency services
as follows:

(1) Without the need for any prior authorization determination.

(2) Whether the health care provider furnishing the services is
a participating provider with respect to those services.

(3) In a manner so that, if the services are provided to an insured:

(A) By a nonparticipating health care provider with or without
prior authorization; or

(B) (i) The services will be provided without imposing any
requirement under the policy for prior authorization of services or
any limitation on coverage where the provider of services does
not have a contractual relationship with the insurer for the
providing of services that is more restrictive than the requirements
or limitations that apply to emergency department services received
from providers who do have such a contractual relationship with
the insurer; and

(ii) If the services are provided to an insured out-of-network,
the cost-sharing requirement, expressed as a copayment amount
or coinsurance rate, is the same requirement that would apply if
the services were provided in-network.

(b) For the purposes of this section, the term “emergency
services” means, with respect to an emergency medical condition:

(1) A medical screening examination that is within the capability
of the emergency department of a hospital, including ancillary
services routinely available to the emergency department to
evaluate that emergency medical condition.

(2) Within the capabilities of the staff and facilities available at
the hospital, further medical examination and treatment as are
required under Section 1867(e)(3) of the federal Social Security
Act (42 U.S.C. 1395dd(e)(3)) to stabilize the patient.

SEC. 11.  

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.