Amended in Assembly September 6, 2013

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 BillNo. 639


Introduced by Senator Hernandez

February 22, 2013


An act to amendbegin delete Sectionend deletebegin insert Sections 1357.503 andend insert 1367 of,begin delete andend delete to add Sections 1367.006, 1367.007, 1367.008, and 1367.009 to,begin insert and to add and repeal Section 1367.0065 of,end insert the Health and Safety Code, and begin insertto amend Section 10753.05 of, and end insertto add Sections 10112.28, 10112.29, 10112.295, 10112.297, and 10112.7 tobegin insert, and to add and repeal Section 10112.285 of,end insert 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.begin insert That provision would not apply to multiple employer welfare arrangements, as specified.end insert

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.begin insert The bill would set the limit at $6,500 for individual coverage and $12,700 for family coverage for the 2014 plan and policy years, and would set a specified limit for pediatric oral care benefits. For later years, those limits would be set using a specified provision of federal law.end insert The bill would prohibit the total annual out-of-pocket maximum for allbegin insert coveredend insert essential benefits from exceeding that limit for a specialized plan or specialized health insurance policy that offers or provides an essential health benefit, as specified, in plan or policy years beginning on or after January 1, 2015.

begin deleteThe 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. end deleteThe bill would also prohibit a plan or insurer from applying a separate out-of-pocket maximum to mental health or substance use disorder benefits.

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.

begin insert

Existing law requires a health care service plan and carrier providing coverage to small employers each calendar year to establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits within a single risk pool, as specified.

end insert
begin insert

This bill would require that index rate to be established at least each calendar year and no more frequently than each calendar quarter.

end insert

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:

P3    1begin insert

begin insertSECTION 1.end insert  

end insert

begin insertSection 1357.503 of the end insertbegin insertHealth and Safety Codeend insertbegin insert,
2as amended by Chapter 2 of the First Extraordinary Session of
3the Statutes of 2013, is amended to read:end insert

P4    1

1357.503.  

(a) (1) On and after October 1, 2013, a plan shall
2fairly and affirmatively offer, market, and sell all of the plan’s
3small employer health care service plan contracts for plan years
4on or after January 1, 2014, to all small employers in each service
5area in which the plan provides or arranges for the provision of
6health care services.

7(2) On and after October 1, 2013, a plan shall make available
8to each small employer all small employer health care service plan
9contracts that the plan offers and sells to small employers or to
10associations that include small employers in this state for plan
11years on or after January 1, 2014. Health coverage through an
12association that is not related to employment shall be considered
13 individual coverage pursuant to Section 144.102(c) of Title 45 of
14the Code of Federal Regulations.

15(3) A plan that offers qualified health plans through the
16Exchange shall be deemed to be in compliance with paragraphs
17(1) and (2) with respect to small employer health care service plan
18contracts offered through the Exchange in those geographic regions
19in which the plan offers plan contracts through the Exchange.

20(b) A plan shall provide enrollment periods consistent with
21PPACA and described in Section 155.725 of Title 45 of the Code
22of Federal Regulations. Commencing January 1, 2014, a plan shall
23provide special enrollment periods consistent with the special
24enrollment periods described in Section 1399.849, to the extent
25permitted by PPACA, except for the triggering events identified
26in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of
27the Code of Federal Regulations with respect to plan contracts
28offered through the Exchange.

29(c) No plan or solicitor shall induce or otherwise encourage a
30small employer to separate or otherwise exclude an eligible
31employee from a health care service plan contract that is provided
32in connection with employee’s employment or membership in a
33guaranteed association.

34(d) Every plan shall file with the director the reasonable
35employee participation requirements and employer contribution
36requirements that will be applied in offering its plan contracts.
37Participation requirements shall be applied uniformly among all
38small employer groups, except that a plan may vary application
39of minimum employee participation requirements by the size of
40the small employer group and whether the employer contributes
P5    1100 percent of the eligible employee’s premium. Employer
2contribution requirements shall not vary by employer size. A health
3care service plan shall not establish a participation requirement
4that (1) requires a person who meets the definition of a dependent
5in Section 1357.500 to enroll as a dependent if he or she is
6otherwise eligible for coverage and wishes to enroll as an eligible
7employee and (2) allows a plan to reject an otherwise eligible small
8employer because of the number of persons that waive coverage
9due to coverage through another employer. Members of an
10association eligible for health coverage under subdivision (m) of
11Section 1357.500, but not electing any health coverage through
12the association, shall not be counted as eligible employees for
13purposes of determining whether the guaranteed association meets
14a plan’s reasonable participation standards.

15(e) The plan shall not reject an application from a small
16employer for a small employer health care service plan contract
17if all of the following conditions are met:

18(1) The small employer offers health benefits to 100 percent of
19its eligible employees. Employees who waive coverage on the
20grounds that they have other group coverage shall not be counted
21as eligible employees.

22(2) The small employer agrees to make the required premium
23payments.

24(3) The small employer agrees to inform the small employer’s
25employees of the availability of coverage and the provision that
26those not electing coverage must wait until the next open
27enrollment or a special enrollment period to obtain coverage
28through the group if they later decide they would like to have
29coverage.

30(4) The employees and their dependents who are to be covered
31by the plan contract work or reside in the service area in which
32the plan provides or otherwise arranges for the provision of health
33care services.

34(f) No plan or solicitor shall, directly or indirectly, engage in
35the following activities:

36(1) Encourage or direct small employers to refrain from filing
37an application for coverage with a plan because of the health status,
38claims experience, industry, occupation of the small employer, or
39geographic location provided that it is within the plan’s approved
40service area.

P6    1(2) Encourage or direct small employers to seek coverage from
2another plan because of the health status, claims experience,
3industry, occupation of the small employer, or geographic location
4provided that it is within the plan’s approved service area.

5(3) Employ marketing practices or benefit designs that will have
6the effect of discouraging the enrollment of individuals with
7significant health needs or discriminate based on an individual’s
8race, color, national origin, present or predicted disability, age,
9sex, gender identity, sexual orientation, expected length of life,
10degree of medical dependency, quality of life, or other health
11conditions.

12(g) A plan shall not, directly or indirectly, enter into any
13contract, agreement, or arrangement with a solicitor that provides
14for or results in the compensation paid to a solicitor for the sale of
15a health care service plan contract to be varied because of the health
16status, claims experience, industry, occupation, or geographic
17location of the small employer. This subdivision does not apply
18to a compensation arrangement that provides compensation to a
19solicitor on the basis of percentage of premium, provided that the
20percentage shall not vary because of the health status, claims
21experience, industry, occupation, or geographic area of the small
22employer.

23(h) (1) A policy or contract that covers a small employer, as
24defined in Section 1304(b) of PPACA and in Section 1357.500,
25shall not establish rules for eligibility, including continued
26eligibility, of an individual, or dependent of an individual, to enroll
27under the terms of the policy or contract based on any of the
28following health status-related factors:

29(A) Health status.

30(B) Medical condition, including physical and mental illnesses.

31(C) Claims experience.

32(D) Receipt of health care.

33(E) Medical history.

34(F) Genetic information.

35(G) Evidence of insurability, including conditions arising out
36of acts of domestic violence.

37(H) Disability.

38(I) Any other health status-related factor as determined by any
39federal regulations, rules, or guidance issued pursuant to Section
402705 of the federal Public Health Service Act.

P7    1(2) Notwithstanding Section 1389.1, a health care service plan
2shall not require an eligible employee or dependent to fill out a
3health assessment or medical questionnaire prior to enrollment
4under a small employer health care service plan contract. A health
5care service plan shall not acquire or request information that
6relates to a health status-related factor from the applicant or his or
7her dependent or any other source prior to enrollment of the
8 individual.

9(i) (1) A health care service plan shall consider as a single risk
10pool for rating purposes in the small employer market the claims
11experience of all enrollees in all nongrandfathered small employer
12health benefit plans offered by the health care service plan in this
13state, whether offered as health care service plan contracts or health
14insurance policies, including those insureds and enrollees who
15enroll in coverage through the Exchange and insureds and enrollees
16covered by the health care service plan outside of the Exchange.

17(2) begin deleteEach end deletebegin insertAt least each end insertcalendar year,begin insert and no more frequently
18than each calendar quarter,end insert
a health care service plan shall
19establish an index rate for the small employer market in the state
20based on the total combined claims costs for providing essential
21health benefits, as defined pursuant to Section 1302 of PPACA
22and Section 1367.005, within the single risk pool required under
23paragraph (1). The index rate shall be adjusted on a marketwide
24basis based on the total expected marketwide payments and charges
25under the risk adjustment and reinsurance programs established
26for the state pursuant to Sections 1343 and 1341 of PPACA. The
27premium rate for all of the health care service plan’s
28nongrandfathered small employer health care service plan contracts
29shall use the applicable index rate, as adjusted for total expected
30marketwide payments and charges under the risk adjustment and
31reinsurance programs established for the state pursuant to Sections
321343 and 1341 of PPACA, subject only to the adjustments
33permitted under paragraph (3).

34(3) A health care service plan may vary premium rates for a
35particular nongrandfathered small employer health care service
36plan contract from its index rate based only on the following
37actuarially justified plan-specific factors:

38(A) The actuarial value and cost-sharing design of the plan
39contract.

P8    1(B) The plan contract’s provider network, delivery system
2characteristics, and utilization management practices.

3(C) The benefits provided under the plan contract that are in
4addition to the essential health benefits, as defined pursuant to
5Section 1302 of PPACA. These additional benefits shall be pooled
6with similar benefits within the single risk pool required under
7paragraph (1) and the claims experience from those benefits shall
8be utilized to determine rate variations for plan contracts that offer
9those benefits in addition to essential health benefits.

10(D) With respect to catastrophic plans, as described in subsection
11(e) of Section 1302 of PPACA, the expected impact of the specific
12eligibility categories for those plans.

13(E) Administrative costs, excluding any user fees required by
14the Exchange.

15(j) A plan shall comply with the requirements of Section 1374.3.

16(k) (1) Except as provided in paragraph (2), if Section 2702 of
17the federal Public Health Service Act (42 U.S.C. Sec. 300gg-1),
18as added by Section 1201 of PPACA, is repealed, this section shall
19become inoperative 12 months after the repeal date, in which case
20health care service plans subject to this section shall instead be
21 governed by Section 1357.03 to the extent permitted by federal
22law, and all references in this article to this section shall instead
23refer to Section 1357.03 except for purposes of paragraph (2).

24(2) Subdivision (b) shall remain operative with respect to health
25care service plan contracts offered through the Exchange.

26

begin deleteSECTION 1.end delete
27begin insertSEC. 2.end insert  

Section 1367 of the Health and Safety Code is amended
28to read:

29

1367.  

A health care service plan and, if applicable, a specialized
30health care service plan shall meet the following requirements:

31(a) Facilities located in this state including, but not limited to,
32clinics, hospitals, and skilled nursing facilities to be utilized by
33the plan shall be licensed by the State Department of Public Health,
34where licensure is required by law. Facilities not located in this
35state shall conform to all licensing and other requirements of the
36jurisdiction in which they are located.

37(b) Personnel employed by or under contract to the plan shall
38be licensed or certified by their respective board or agency, where
39licensure or certification is required by law.

P9    1(c) Equipment required to be licensed or registered by law shall
2be so licensed or registered, and the operating personnel for that
3equipment shall be licensed or certified as required by law.

4(d) The plan shall furnish services in a manner providing
5continuity of care and ready referral of patients to other providers
6at times as may be appropriate consistent with good professional
7practice.

8(e) (1) All services shall be readily available at reasonable times
9to each enrollee consistent with good professional practice. To the
10extent feasible, the plan shall make all services readily accessible
11to all enrollees consistent with Section 1367.03.

12(2) To the extent that telehealth services are appropriately
13provided through telehealth, as defined in subdivision (a) of Section
142290.5 of the Business and Professions Code, these services shall
15be considered in determining compliance with Section 1300.67.2
16of Title 28 of the California Code of Regulations.

17(3) The plan shall make all services accessible and appropriate
18consistent with Section 1367.04.

19(f) The plan shall employ and utilize allied health manpower
20for the furnishing of services to the extent permitted by law and
21consistent with good medical practice.

22(g) The plan shall have the organizational and administrative
23capacity to provide services to subscribers and enrollees. The plan
24shall be able to demonstrate to the department that medical
25decisions are rendered by qualified medical providers, unhindered
26by fiscal and administrative management.

27(h) (1) Contracts with subscribers and enrollees, including
28group contracts, and contracts with providers, and other persons
29furnishing services, equipment, or facilities to or in connection
30with the plan, shall be fair, reasonable, and consistent with the
31objectives of this chapter. All contracts with providers shall contain
32provisions requiring a fast, fair, and cost-effective dispute
33resolution mechanism under which providers may submit disputes
34to the plan, and requiring the plan to inform its providers upon
35contracting with the plan, or upon change to these provisions, of
36the procedures for processing and resolving disputes, including
37the location and telephone number where information regarding
38disputes may be submitted.

P10   1(2) A health care service plan shall ensure that a dispute
2resolution mechanism is accessible to noncontracting providers
3for the purpose of resolving billing and claims disputes.

4(3) On and after January 1, 2002, a health care service plan shall
5annually submit a report to the department regarding its dispute
6resolution mechanism. The report shall include information on the
7number of providers who utilized the dispute resolution mechanism
8and a summary of the disposition of those disputes.

9(i) A health care service plan contract shall provide to
10subscribers and enrollees all of the basic health care services
11included in subdivision (b) of Section 1345, except that the director
12may, for good cause, by rule or order exempt a plan contract or
13any class of plan contracts from that requirement. The director
14shall by rule define the scope of each basic health care service that
15health care service plans are required to provide as a minimum for
16licensure under this chapter. Nothing in this chapter shall prohibit
17a health care service plan from charging subscribers or enrollees
18a copayment or a deductible for a basic health care service
19consistent with Section 1367.006 or 1367.007, provided that the
20copayments, deductibles, or other cost sharing are reported to the
21director and set forth to the subscriber or enrollee pursuant to the
22disclosure provisions of Section 1363. Nothing in this chapter shall
23prohibit a health care service plan from setting forth, by contract,
24limitations on maximum coverage of basic health care services,
25provided that the limitations are reported to, and held
26unobjectionable by, the director and set forth to the subscriber or
27enrollee pursuant to the disclosure provisions of Section 1363.

28(j) A health care service plan shall not require registration under
29the federal Controlled Substances Act (21 U.S.C. Sec. 801 et seq.)
30as a condition for participation by an optometrist certified to use
31therapeutic pharmaceutical agents pursuant to Section 3041.3 of
32the Business and Professions Code.

33Nothing in this section shall be construed to permit the director
34to establish the rates charged subscribers and enrollees for
35contractual health care services.

36The director’s enforcement of Article 3.1 (commencing with
37Section 1357) shall not be deemed to establish the rates charged
38subscribers and enrollees for contractual health care services.

39The obligation of the plan to comply with this chapter shall not
40be waived when the plan delegates any services that it is required
P11   1to perform to its medical groups, independent practice associations,
2or other contracting entities.

3

begin deleteSEC. 2.end delete
4begin insertSEC. 3.end insert  

Section 1367.006 is added to the Health and Safety
5Code
, to read:

6

1367.006.  

(a) begin insertThis section shall apply to nongrandfathered
7individual and group health care service plan contracts that
8provide coverage for essential health benefits, as defined in Section
91367.005, and that are issued, amended, or renewed on or after
10January 1, 2015.end insert

11begin insert(b)end insertbegin insertend insert (1) For nongrandfatheredbegin delete productsend deletebegin insert health care service plan
12contractsend insert
in the individual or small group markets, a health care
13service plan contract, except a specialized health care service plan
14contract, that is issued, amended, or renewed on or after January
151, begin delete2014, end deletebegin insert 2015, end insert shall provide for a limit on annual out-of-pocket
16expenses for all covered benefits that meet the definition of
17essential health benefits in Section 1367.005begin insert, including
18out-of-network emergency care consistent with Section 1317.4end insert
.

begin delete

19(A) In the first plan year commencing on or after January 1,
202014, to the extent allowed by federal law, for nongrandfathered
21products in the individual and small group markets, when a health
22care service plan uses a separate service provider to administer the
23pediatric oral care benefits required by Section 1367.005, the limit
24on annual out-of-pocket expenses shall be satisfied if both of the
25following conditions are met:

26(i) With respect to all essential health benefits except for the
27pediatric oral care benefit, the health care service plan complies
28with the out-of-pocket maximum requirements in Section
291302(c)(1) of PPACA and any federal rules, regulations, and
30guidance implementing that section.

31(ii) The separate out-of-pocket maximum for pediatric oral care
32benefits does not exceed the out-of-pocket maximum requirements
33for pediatric dental benefits established for stand-alone dental plans
34by the California Health Benefit Exchange.

35(B) The health care service plan shall not apply a separate
36out-of-pocket maximum to mental health or substance use disorder
37benefits.

end delete

38(2) For nongrandfatheredbegin delete productsend deletebegin insert health care service plan
39contractsend insert
in the large group market, a health care service plan
40contract, except a specialized health care service plan contract,
P12   1that is issued, amended, or renewed on or after January 1,begin delete 2014,end delete
2begin insert 2015,end insert shall provide for a limit on annual out-of-pocket expenses
3for covered benefits, including out-of-network emergency care
4consistent with Section 1371.4. This limit shallbegin insert onlyend insert apply to
5essential health benefits, as defined in Section 1367.005, that are
6covered under the plan to the extent that this provision does not
7conflict with federal law or guidance on out-of-pocket maximums
8for nongrandfatheredbegin delete productsend deletebegin insert health care service plan contractsend insert
9 in the large group market.begin delete For large group products for the first
10plan year commencing on or after January 1, 2014, the requirement
11that a product provide for a limit on annual out-of-pocket expenses
12shall be satisfied if both of the following apply:end delete

begin delete

13(A) The product complies with the requirements of this
14paragraph with respect to basic health care services, as defined in
15subdivision (b) of Section 1345, services required under Sections
161374.72 and 1374.73, and any requirements of the Paul Wellstone
17and Pete Domenci Mental Health Parity and Addiction Equity Act
18of 2008 (Public Law 110-343).

19(B) To the extent the product includes an out-of-pocket
20maximum on coverage other than the coverage described in
21subparagraph (A), that out-of-pocket maximum also does not
22exceed the limit established pursuant to this paragraph.

23(b) The limit described in subdivision (a) shall apply to any
24copayment, coinsurance, deductible, incentive payment, and any
25other form of cost sharing for all covered benefits, including
26prescription drugs covered pursuant to Section 1367.24.

end delete

27(c) begin insert(1)end insertbegin insertend insertThe limit described in subdivisionbegin delete (a)end deletebegin insert (b)end insert shall not exceed
28the limit described in Section 1302(c) of PPACA, and any
29subsequent rules, regulations, or guidance issued under that section.

begin insert

30(2) The limit described in subdivision (b) shall result in a total
31maximum out-of-pocket limit for all essential health benefits equal
32to the dollar amounts in effect under Section 223(c)(2)(A)(ii) of
33the Internal Revenue Code of 1986 with the dollar amounts
34adjusted as specified in Section 1302(c)(1)(B) of PPACA.

end insert

35(d) Nothing in this section shall be construed to affect the
36reduction in cost sharing for eligible enrollees described in Section
371402 of PPACA, and any subsequent rules, regulations, or guidance
38issued under that section.

39(e) begin deleteFor plan years beginning on or after January 1, 2015, if end deletebegin insertIf end insert
40an essential health benefit is offered or provided by a specialized
P13   1begin insert health care serviceend insert plan, the total annual out-of-pocket maximum
2for allbegin insert coveredend insert essential benefits shall not exceed the limit inbegin delete this
3sectionend delete
begin insert subdivision (b)end insert. This section shall not apply to a specialized
4begin insert health care serviceend insert plan that does not offer an essential health
5benefit as defined in Section 1367.005.

begin insert

6(f) The maximum out-of-pocket limit shall apply to any
7copayment, coinsurance, deductible, and any other form of cost
8sharing for all covered benefits that meet the definition of essential
9health benefits in Section 1367.005.

end insert
begin delete

10(f)

end delete

11begin insert(g)end insert For nongrandfathered health plan contracts in the group
12market, “plan year” has the meaning set forth in Section 144.103
13of Title 45 of the Code of Federal Regulations. For
14nongrandfathered health plan contracts sold in the individual
15market, “plan year” means the calendar year.

begin delete

16(g)

end delete

17begin insert(h)end insert “PPACA” means the federal Patient Protection and
18Affordable Care Act (Public Law 111-148), as amended by the
19federal Health Care and Education Reconciliation Act of 2010
20(Public Law 111-152), and any rules, regulations, or guidance
21issued thereunder.

22begin insert

begin insertSEC. 4.end insert  

end insert

begin insertSection 1367.0065 is added to the end insertbegin insertHealth and Safety
23Code
end insert
begin insert, to read:end insert

begin insert
24

begin insert1367.0065.end insert  

(a) This section shall apply to nongrandfathered
25individual and group health care service plan contracts that
26provide coverage for essential health benefits defined in Section
271367.005 and that are issued, amended, or renewed for the 2014
28plan year.

29(b) (1) For nongrandfathered health care service plan contracts
30in the individual market, and to the extent allowed by federal law,
31regulations, and guidance, a health care service plan contract,
32except a specialized health care service plan contract, shall provide
33for a limit on annual out-of-pocket expenses for all covered benefits
34that meet the definition of essential health benefits as defined in
35Section 1367.005, including out-of-network emergency care
36consistent with Section 1371.4. The total out-of-pocket maximum
37shall not exceed six thousand three hundred fifty dollars ($6,350)
38for individual coverage and twelve thousand seven hundred dollars
39($12,700) for family coverage.

P14   1(2) For nongrandfathered specialized health care service plan
2contracts in the individual market that provide the pediatric oral
3care benefit meeting the definition in Section 1302(b)(1)(j) of
4PPACA, the out-of-pocket maximum for the pediatric oral care
5benefit shall not exceed one thousand dollars ($1,000) for one
6child and two thousand dollars ($2,000) for more than one child.

7(3) A health care service plan shall not apply a separate
8out-of-pocket maximum to mental health or substance use disorder
9benefits.

10(c) For nongrandfathered health care service plan contracts in
11the small group markets, and to the extent allowed by federal law,
12regulations, and guidance, a health care service plan contract,
13except a specialized health care service plan contract, shall provide
14for a limit on annual out-of-pocket expenses for all covered benefits
15that meet the definition of essential health benefits, as defined in
16Section 1367.005, including out-of-network emergency care
17consistent with Section 1371.4, as follows:

18(1) With respect to all essential health benefits, except for the
19pediatric oral care benefit, the total out-of-pocket maximum shall
20not exceed six thousand three hundred fifty dollars ($6,350) for
21individual coverage and twelve thousand seven hundred dollars
22($12,700) for family coverage. For small group health plan
23contracts the total out-of-pocket maximum limit in this paragraph
24may be split between prescription drug services and all other
25essential health benefits.

26(2) The separate out-of-pocket maximum for pediatric oral care
27benefits meeting the definition in Section 1302(b)(1)(j) of PPACA
28shall not exceed one thousand dollars ($1,000) for one child or
29two thousand dollars ($2,000) for more than one child.

30(3) A health care service plan shall not apply a separate
31out-of-pocket maximum to mental health or substance use disorder
32benefits.

33(d) For nongrandfathered health care service plan contracts in
34the large group market, a health care service plan contract, except
35a specialized health care service plan contract, shall provide for
36a limit on annual out-of-pocket expenses for covered benefits,
37including out-of-network emergency care consistent with Section
381371.4. This limit shall apply only to essential health benefits, as
39defined in Section 1367.005, that are covered under the plan
40contract. This limit shall be as follows:

P15   1(1) The total out-of-pocket maximum shall not exceed six
2thousand three hundred fifty dollars ($6,350) for individual
3coverage or twelve thousand seven hundred dollars ($12,700) for
4family coverage with respect to basic health care services as
5defined in subdivision (b) of Section 1345, and services, except
6for prescription drugs, required under Sections 1374.72 and
71374.73.

8(2) To the extent the plan contract includes an out-of-pocket
9maximum on coverage other than the coverage defined in
10paragraph (1), that out-of-pocket maximum shall not exceed six
11thousand three hundred fifty dollars ($6,350) for individual
12coverage or twelve thousand seven hundred dollars ($12,700) for
13family coverage.

14(3) An enrollee in a large group plan contract shall not be
15subject to more than two limits on annual out-of-pocket expenses
16for covered benefits that meet the definition of essential health
17benefits.

18(4) A health care service plan shall not apply a separate
19out-of-pocket maximum to mental health or substance use disorder
20benefits.

21(5) This subdivision shall apply only to the extent that it does
22not conflict with federal law or guidance on out-of-pocket
23maximums for nongrandfathered health plan contracts in the large
24group market.

25(e) Nothing in this section shall be construed to affect the
26reduction in cost sharing for eligible enrollees described in Section
271402 of PPACA, and any subsequent rules, regulations, or
28guidance issued under that section.

29(f) The limits described in this section shall apply to any
30copayment, coinsurance, deductible, and any other form of cost
31sharing for all covered services that meet the definition of essential
32health benefits.

33(g) For nongrandfathered health plan contracts in the group
34market, “plan year” has the meaning set forth in Section 144.103
35of Title 45 of the Code of Federal Regulations. For
36nongrandfathered health plan contracts sold in the individual
37market, “plan year” means the calendar year.

38(h) “PPACA” means the federal Patient Protection and
39Affordable Care Act (Public Law 111-148), as amended by the
40federal Health Care and Education Reconciliation Act of 2010
P16   1(Public Law 111-152), and any rules, regulations, or guidance
2issued thereunder.

3(i) This section shall remain in effect only until January 1, 2016,
4and as of that date is repealed, unless a later enacted statute, that
5is enacted before January 1, 2016, deletes or extends that date.

end insert
6

begin deleteSEC. 3.end delete
7begin insertSEC. 5.end insert  

Section 1367.007 is added to the Health and Safety
8Code
, to read:

9

1367.007.  

(a) (1) For a small employer health care service
10plan contract offered, sold, or renewed on or after January 1, 2014,
11the deductible under the plan shall not exceed:

12(A) Two thousand dollars ($2,000) in the case of a plan contract
13covering a single individual.

14(B) Four thousand dollars ($4,000) in the case of any other plan
15contract.

16(2) The dollar amounts in this section shall be indexed consistent
17with Section 1302(c)(2) of PPACA and any federal rules or
18guidance pursuant to that section.

19(3) The limitation in this subdivision shall be applied in a
20manner that does not affect the actuarial value of any small
21employer health care service plan contract.

22(4) For small group products at the bronze level of coverage,
23as defined in Section 1367.008, the department may permit plans
24to offer a higher deductible in order to meet the actuarial value
25requirement of the bronze level. In making this determination, the
26department shall consider affordability of cost sharing for enrollees
27and shall also consider whether enrollees may be deterred from
28seeking appropriate care because of higher cost sharing.

29(b) Nothing in this section shall be construed to allow a plan
30contract to have a deductible that applies to preventive services as
31defined in Section 1367.002.

32(c) “PPACA” means the federal Patient Protection and
33Affordable Care Act (Public Law 111-148), as amended by the
34federal Health Care and Education Reconciliation Act of 2010
35(Public Law 111-152), and any rules, regulations, or guidance
36issued thereunder.

37

begin deleteSEC. 4.end delete
38begin insertSEC. 6.end insert  

Section 1367.008 is added to the Health and Safety
39Code
, to read:

P17   1

1367.008.  

(a) Levels of coverage for the nongrandfathered
2individual market are defined as follows:

3(1) Bronze level: A health care service plan contract in the
4bronze level shall provide a level of coverage that is actuarially
5equivalent to 60 percent of the full actuarial value of the benefits
6provided under the plan contract.

7(2) Silver level: A health care service plan contract in the silver
8level shall provide a level of coverage that is actuarially equivalent
9to 70 percent of the full actuarial value of the benefits provided
10under the plan contract.

11(3) Gold level: A health care service plan contract in the gold
12level shall provide a level of coverage that is actuarially equivalent
13to 80 percent of the full actuarial value of the benefits provided
14under the plan contract.

15(4) Platinum level: A health care service plan contract in the
16platinum level shall provide a level of coverage that is actuarially
17equivalent to 90 percent of the full actuarial value of the benefits
18provided under the plan contract.

19(b) Actuarial value for nongrandfathered individual health care
20service plan contracts shall be determined in accordance with the
21following:

22(1) Actuarial value shall not vary by more than plus or minus
232 percent.

24(2) Actuarial value shall be determined on the basis of essential
25health benefits as defined in Section 1367.005 and as provided to
26a standard, nonelderly population. For this purpose, a standard
27population shall not include those receiving coverage through the
28Medi-Cal or Medicare programs.

29(3) The department may use the actuarial value methodology
30developed consistent with Section 1302(d) of PPACA.

31(4) The actuarial value for pediatric dental benefits, whether
32offered by a full service plan or a specialized plan, shall be
33consistent with federal law and guidance applicable to the plan
34type.

35(5) The department, in consultation with the Department of
36Insurance and the Exchange, shall consider whether to exercise
37state-level flexibility with respect to the actuarial value calculator
38in order to take into account the unique characteristics of the
39California health care coverage market, including the prevalence
40of health care service plans, total cost of care paid for by the plan,
P18   1price of care, patterns of service utilization, and relevant
2demographic factors.

3(c) (1) A catastrophic plan is a health care service plan contract
4that provides no benefits for any plan year until the enrollee has
5incurred cost-sharing expenses in an amount equal to the annual
6limit on out-of-pocket costs as specified in Section 1367.006 except
7that it shall provide coverage for at least three primary care visits.
8A carrier that is not participating in the Exchange shall not offer,
9market, or sell a catastrophic plan in the individual market.

10(2) A catastrophic plan may be offered only in the individual
11market and only if consistent with this paragraph. Catastrophic
12plans may be offered only if either of the following apply:

13(A) The individual purchasing the plan has not yet attained 30
14years of age before the beginning of the plan year.

15(B) The individual has a certificate of exemption from Section
165000(A) of the Internal Revenue Code because the individual is
17not offered affordable coverage or because the individual faces
18hardship.

19(d) “PPACA” means the federal Patient Protection and
20Affordable Care Act (Public Law 111-148), as amended by the
21federal Health Care and Education Reconciliation Act of 2010
22(Public Law 111-152), and any rules, regulations, or guidance
23issued thereunder.

24

begin deleteSEC. 5.end delete
25begin insertSEC. 7.end insert  

Section 1367.009 is added to the Health and Safety
26Code
, to read:

27

1367.009.  

(a) Levels of coverage for the nongrandfathered
28small group market are defined as follows:

29(1) Bronze level: A health care service plan contract in the
30bronze level shall provide a level of coverage that is actuarially
31equivalent to 60 percent of the full actuarial value of the benefits
32provided under the plan contract.

33(2) Silver level: A health care service plan contract in the silver
34level shall provide a level of coverage that is actuarially equivalent
35to 70 percent of the full actuarial value of the benefits provided
36under the plan contract.

37(3) Gold level: A health care service plan contract in the gold
38level shall provide a level of coverage that is actuarially equivalent
39to 80 percent of the full actuarial value of the benefits provided
40under the plan contract.

P19   1(4) Platinum level: A health care service plan contract in the
2platinum level shall provide a level of coverage that is actuarially
3equivalent to 90 percent of the full actuarial value of the benefits
4provided under the plan contract.

5(b) Actuarial value for nongrandfathered small employer health
6care service plan contracts shall be determined in accordance with
7the following:

8(1) Actuarial value shall not vary by more than plus or minus
92 percent.

10(2) Actuarial value shall be determined on the basis of essential
11health benefits as defined in Section 1367.005 and as provided to
12a standard, nonelderly population. For this purpose, a standard
13population shall not include those receiving coverage through the
14Medi-Cal or Medicare programs.

15(3) The department may use the actuarial value methodology
16developed consistent with Section 1302(d) of PPACA.

17(4) The actuarial value for pediatric dental benefits, whether
18offered by a full service plan or a specialized plan, shall be
19consistent with federal law and guidance applicable to the plan
20type.

21(5) The department, in consultation with the Department of
22Insurance and the Exchange, shall consider whether to exercise
23state-level flexibility with respect to the actuarial value calculator
24in order to take into account the unique characteristics of the
25California health care coverage market, including the prevalence
26of health care service plans, total cost of care paid for by the plan,
27price of care, patterns of service utilization, and relevant
28demographic factors.

29(6) Employer contributions toward health reimbursement
30accounts and health savings accounts shall count toward the
31actuarial value of the product in the manner specified in federal
32rules and guidance.

33(c) “PPACA” means the federal Patient Protection and
34Affordable Care Act (Public Law 111-148), as amended by the
35federal Health Care and Education Reconciliation Act of 2010
36(Public Law 111-152), and any rules, regulations, or guidance
37issued thereunder.

38begin insert

begin insertSEC. 8.end insert  

end insert

begin insertSection 10753.05 of the end insertbegin insertInsurance Codeend insertbegin insert, as amended
39by Chapter 1 of the First Extraordinary Session of the Statutes of
402013, is amended to read:end insert

P20   1

10753.05.  

(a) No group or individual policy or contract or
2certificate of group insurance or statement of group coverage
3providing benefits to employees of small employers as defined in
4this chapter shall be issued or delivered by a carrier subject to the
5jurisdiction of the commissioner regardless of the situs of the
6contract or master policyholder or of the domicile of the carrier
7nor, except as otherwise provided in Sections 10270.91 and
810270.92, shall a carrier provide coverage subject to this chapter
9until a copy of the form of the policy, contract, certificate, or
10statement of coverage is filed with and approved by the
11commissioner in accordance with Sections 10290 and 10291, and
12the carrier has complied with the requirements of Section 10753.17.

13(b) (1) On and after October 1, 2013, each carrier shall fairly
14and affirmatively offer, market, and sell all of the carrier’s health
15benefit plans that are sold to, offered through, or sponsored by,
16small employers or associations that include small employers for
17plan years on or after January 1, 2014, to all small employers in
18each geographic region in which the carrier makes coverage
19available or provides benefits.

20(2) A carrier that offers qualified health plans through the
21Exchange shall be deemed to be in compliance with paragraph (1)
22with respect to health benefit plans offered through the Exchange
23in those geographic regions in which the carrier offers plans
24through the Exchange.

25(3) A carrier shall provide enrollment periods consistent with
26PPACA and described in Section 155.725 of Title 45 of the Code
27of Federal Regulations. Commencing January 1, 2014, a carrier
28shall provide special enrollment periods consistent with the special
29enrollment periods described in Section 10965.3, to the extent
30permitted by PPACA, except for the triggering events identified
31in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of
32the Code of Federal Regulations with respect to health benefit
33plans offered through the Exchange.

34(4) Nothing in this section shall be construed to require an
35association, or a trust established and maintained by an association
36to receive a master insurance policy issued by an admitted insurer
37and to administer the benefits thereof solely for association
38members, to offer, market or sell a benefit plan design to those
39who are not members of the association. However, if the
40association markets, offers or sells a benefit plan design to those
P21   1who are not members of the association it is subject to the
2requirements of this section. This shall apply to an association that
3otherwise meets the requirements of paragraph (8) formed by
4merger of two or more associations after January 1, 1992, if the
5predecessor organizations had been in active existence on January
61, 1992, and for at least five years prior to that date and met the
7requirements of paragraph (5).

8(5) A carrier which (A) effective January 1, 1992, and at least
920 years prior to that date, markets, offers, or sells benefit plan
10designs only to all members of one association and (B) does not
11market, offer or sell any other individual, selected group, or group
12policy or contract providing medical, hospital and surgical benefits
13shall not be required to market, offer, or sell to those who are not
14members of the association. However, if the carrier markets, offers
15or sells any benefit plan design or any other individual, selected
16group, or group policy or contract providing medical, hospital and
17surgical benefits to those who are not members of the association
18it is subject to the requirements of this section.

19(6) Each carrier that sells health benefit plans to members of
20one association pursuant to paragraph (5) shall submit an annual
21statement to the commissioner which states that the carrier is selling
22health benefit plans pursuant to paragraph (5) and which, for the
23one association, lists all the information required by paragraph (7).

24(7) Each carrier that sells health benefit plans to members of
25any association shall submit an annual statement to the
26commissioner which lists each association to which the carrier
27sells health benefit plans, the industry or profession which is served
28by the association, the association’s membership criteria, a list of
29officers, the state in which the association is organized, and the
30site of its principal office.

31(8) For purposes of paragraphs (4) and (6), an association is a
32nonprofit organization comprised of a group of individuals or
33employers who associate based solely on participation in a
34specified profession or industry, accepting for membership any
35individual or small employer meeting its membership criteria,
36which do not condition membership directly or indirectly on the
37health or claims history of any person, which uses membership
38dues solely for and in consideration of the membership and
39membership benefits, except that the amount of the dues shall not
40depend on whether the member applies for or purchases insurance
P22   1offered by the association, which is organized and maintained in
2good faith for purposes unrelated to insurance, which has been in
3active existence on January 1, 1992, and at least five years prior
4to that date, which has a constitution and bylaws, or other
5analogous governing documents which provide for election of the
6governing board of the association by its members, which has
7 contracted with one or more carriers to offer one or more health
8benefit plans to all individual members and small employer
9members in this state. Health coverage through an association that
10is not related to employment shall be considered individual
11coverage pursuant to Section 144.102(c) of Title 45 of the Code
12of Federal Regulations.

13(c) On and after October 1, 2013, each carrier shall make
14available to each small employer all health benefit plans that the
15carrier offers or sells to small employers or to associations that
16include small employers for plan years on or after January 1, 2014.
17Notwithstanding subdivision (d) of Section 10753, for purposes
18of this subdivision, companies that are affiliated companies or that
19are eligible to file a consolidated income tax return shall be treated
20as one carrier.

21(d) Each carrier shall do all of the following:

22(1) Prepare a brochure that summarizes all of its health benefit
23plans and make this summary available to small employers, agents,
24and brokers upon request. The summary shall include for each
25plan information on benefits provided, a generic description of the
26manner in which services are provided, such as how access to
27providers is limited, benefit limitations, required copayments and
28deductibles, an explanation of how creditable coverage is calculated
29if a waiting period is imposed, and a telephone number that can
30be called for more detailed benefit information. Carriers are
31required to keep the information contained in the brochure accurate
32and up to date, and, upon updating the brochure, send copies to
33agents and brokers representing the carrier. Any entity that provides
34administrative services only with regard to a health benefit plan
35written or issued by another carrier shall not be required to prepare
36a summary brochure which includes that benefit plan.

37(2) For each health benefit plan, prepare a more detailed
38evidence of coverage and make it available to small employers,
39agents and brokers upon request. The evidence of coverage shall
40contain all information that a prudent buyer would need to be aware
P23   1of in making selections of benefit plan designs. An entity that
2provides administrative services only with regard to a health benefit
3plan written or issued by another carrier shall not be required to
4prepare an evidence of coverage for that health benefit plan.

5(3) Provide copies of the current summary brochure to all agents
6or brokers who represent the carrier and, upon updating the
7brochure, send copies of the updated brochure to agents and brokers
8representing the carrier for the purpose of selling health benefit
9plans.

10(4) Notwithstanding subdivision (c) of Section 10753, for
11purposes of this subdivision, companies that are affiliated
12companies or that are eligible to file a consolidated income tax
13return shall be treated as one carrier.

14(e) Every agent or broker representing one or more carriers for
15the purpose of selling health benefit plans to small employers shall
16do all of the following:

17(1) When providing information on a health benefit plan to a
18small employer but making no specific recommendations on
19particular benefit plan designs:

20(A) Advise the small employer of the carrier’s obligation to sell
21to any small employer any of the health benefit plans it offers to
22small employers, consistent with PPACA, and provide them, upon
23request, with the actual rates that would be charged to that
24employer for a given health benefit plan.

25(B) Notify the small employer that the agent or broker will
26procure rate and benefit information for the small employer on
27any health benefit plan offered by a carrier for whom the agent or
28broker sells health benefit plans.

29(C) Notify the small employer that, upon request, the agent or
30broker will provide the small employer with the summary brochure
31required in paragraph (1) of subdivision (d) for any benefit plan
32design offered by a carrier whom the agent or broker represents.

33(D) Notify the small employer of the availability of coverage
34and the availability of tax credits for certain employers consistent
35with PPACA and state law, including any rules, regulations, or
36guidance issued in connection therewith.

37(2) When recommending a particular benefit plan design or
38designs, advise the small employer that, upon request, the agent
39will provide the small employer with the brochure required by
P24   1paragraph (1) of subdivision (d) containing the benefit plan design
2or designs being recommended by the agent or broker.

3(3) Prior to filing an application for a small employer for a
4particular health benefit plan:

5(A) For each of the health benefit plans offered by the carrier
6whose health benefit plan the agent or broker is presenting, provide
7the small employer with the benefit summary required in paragraph
8(1) of subdivision (d) and the premium for that particular employer.

9(B) Notify the small employer that, upon request, the agent or
10broker will provide the small employer with an evidence of
11coverage brochure for each health benefit plan the carrier offers.

12(C) Obtain a signed statement from the small employer
13acknowledging that the small employer has received the disclosures
14required by this paragraph and Section 10753.16.

15(f) No carrier, agent, or broker shall induce or otherwise
16encourage a small employer to separate or otherwise exclude an
17eligible employee from a health benefit plan which, in the case of
18an eligible employee meeting the definition in paragraph (1) of
19subdivision (f) of Section 10753, is provided in connection with
20the employee’s employment or which, in the case of an eligible
21employee as defined in paragraph (2) of subdivision (f) of Section
2210753, is provided in connection with a guaranteed association.

23(g) No carrier shall reject an application from a small employer
24for a health benefit plan provided:

25(1) The small employer as defined by subparagraph (A) of
26paragraph (1) of subdivision (q) of Section 10753 offers health
27benefits to 100 percent of its eligible employees as defined in
28paragraph (1) of subdivision (f) of Section 10753. Employees who
29waive coverage on the grounds that they have other group coverage
30shall not be counted as eligible employees.

31(2) The small employer agrees to make the required premium
32payments.

33(h) No carrier or agent or broker shall, directly or indirectly,
34engage in the following activities:

35(1) Encourage or direct small employers to refrain from filing
36an application for coverage with a carrier because of the health
37status, claims experience, industry, occupation, or geographic
38location within the carrier’s approved service area of the small
39employer or the small employer’s employees.

P25   1(2) Encourage or direct small employers to seek coverage from
2another carrier because of the health status, claims experience,
3industry, occupation, or geographic location within the carrier’s
4approved service area of the small employer or the small
5employer’s employees.

6(3) Employ marketing practices or benefit designs that will have
7the effect of discouraging the enrollment of individuals with
8significant health needs or discriminate based on the individual’s
9race, color, national origin, present or predicted disability, age,
10sex, gender identity, sexual orientation, expected length of life,
11degree of medical dependency, quality of life, or other health
12conditions.

13This subdivision shall be enforced in the same manner as Section
14790.03, including through Sections 790.035 and 790.05.

15(i) No carrier shall, directly or indirectly, enter into any contract,
16agreement, or arrangement with an agent or broker that provides
17for or results in the compensation paid to an agent or broker for a
18health benefit plan to be varied because of the health status, claims
19experience, industry, occupation, or geographic location of the
20small employer or the small employer’s employees. This
21subdivision shall not apply with respect to a compensation
22arrangement that provides compensation to an agent or broker on
23the basis of percentage of premium, provided that the percentage
24shall not vary because of the health status, claims experience,
25industry, occupation, or geographic area of the small employer.

26(j) (1) A health benefit plan offered to a small employer, as
27defined in Section 1304(b) of PPACA and in Section 10753, shall
28not establish rules for eligibility, including continued eligibility,
29of an individual, or dependent of an individual, to enroll under the
30terms of the plan based on any of the following health status-related
31factors:

32(A) Health status.

33(B) Medical condition, including physical and mental illnesses.

34(C) Claims experience.

35(D) Receipt of health care.

36(E) Medical history.

37(F) Genetic information.

38(G) Evidence of insurability, including conditions arising out
39of acts of domestic violence.

40(H) Disability.

P26   1(I) Any other health status-related factor as determined by any
2federal regulations, rules, or guidance issued pursuant to Section
32705 of the federal Public Health Service Act.

4(2) Notwithstanding Section 10291.5, a carrier shall not require
5an eligible employee or dependent to fill out a health assessment
6or medical questionnaire prior to enrollment under a health benefit
7plan. A carrier shall not acquire or request information that relates
8to a health status-related factor from the applicant or his or her
9dependent or any other source prior to enrollment of the individual.

10(k) (1) A carrier shall consider as a single risk pool for rating
11purposes in the small employer market the claims experience of
12all insureds in all nongrandfathered small employer health benefit
13plans offered by the carrier in this state, whether offered as health
14care service plan contracts or health insurance policies, including
15those insureds and enrollees who enroll in coverage through the
16Exchange and insureds and enrollees covered by the carrier outside
17of the Exchange.

18(2) begin deleteEach end deletebegin insertAt least each end insertcalendar year,begin insert and no more frequently
19than each calendar quarter,end insert
a carrier shall establish an index rate
20for the small employer market in the state based on the total
21combined claims costs for providing essential health benefits, as
22defined pursuant to Section 1302 of PPACA and Section 10112.27,
23within the single risk pool required under paragraph (1). The index
24rate shall be adjusted on a marketwide basis based on the total
25expected marketwide payments and charges under the risk
26adjustment and reinsurance programs established for the state
27pursuant to Sections 1343 and 1341 of PPACA. The premium rate
28for all of the carrier’s nongrandfathered health benefit plans shall
29use the applicable index rate, as adjusted for total expected
30marketwide payments and charges under the risk adjustment and
31reinsurance programs established for the state pursuant to Sections
321343 and 1341 of PPACA, subject only to the adjustments
33permitted under paragraph (3).

34(3) A carrier may vary premium rates for a particular
35nongrandfathered health benefit plan from its index rate based
36only on the following actuarially justified plan-specific factors:

37(A) The actuarial value and cost-sharing design of the health
38benefit plan.

39(B) The health benefit plan’s provider network, delivery system
40characteristics, and utilization management practices.

P27   1(C) The benefits provided under the health benefit plan that are
2in addition to the essential health benefits, as defined pursuant to
3Section 1302 of PPACA. These additional benefits shall be pooled
4with similar benefits within the single risk pool required under
5paragraph (1) and the claims experience from those benefits shall
6be utilized to determine rate variations for health benefit plans that
7offer those benefits in addition to essential health benefits.

8(D) Administrative costs, excluding any user fees required by
9the Exchange.

10(E) With respect to catastrophic plans, as described in subsection
11(e) of Section 1302 of PPACA, the expected impact of the specific
12eligibility categories for those plans.

13(l) If a carrier enters into a contract, agreement, or other
14arrangement with a third-party administrator or other entity to
15provide administrative, marketing, or other services related to the
16offering of health benefit plans to small employers in this state,
17the third-party administrator shall be subject to this chapter.

18(m) (1) Except as provided in paragraph (2), this section shall
19become inoperative if Section 2702 of the federal Public Health
20Service Act (42 U.S.C. Sec. 300gg-1), as added by Section 1201
21of PPACA, is repealed, in which case, 12 months after the repeal,
22carriers subject to this section shall instead be governed by Section
2310705 to the extent permitted by federal law, and all references in
24this chapter to this section shall instead refer to Section 10705,
25except for purposes of paragraph (2).

26(2) Paragraph (3) of subdivision (b) of this section shall remain
27operative as it relates to health benefit plans offered through the
28Exchange.

29

begin deleteSEC. 6.end delete
30begin insertSEC. 9.end insert  

Section 10112.28 is added to the Insurance Code, to
31read:

32

10112.28.  

(a) begin insertThis section shall apply to nongrandfathered
33individual and group health insurance policies that provide
34coverage for essential health benefits, as defined in Section
3510112.27, and that are issued, amended, or renewed on or after
36January 1, 2015.end insert

37begin insert(b)end insert (1) For nongrandfatheredbegin delete productsend deletebegin insert health insurance policiesend insert
38 in the individual or small group markets, a health insurance policy,
39except a specialized health insurance policy, that is issued,
40amended, or renewed on or after January 1,begin delete 2014,end deletebegin insert 2015,end insert shall
P28   1provide for a limit on annual out-of-pocket expenses for all covered
2benefits that meet the definition of essential health benefits in
3Section 10112.27begin insert, including out-of-network emergency careend insert.

begin delete

4(A) In the first policy year commencing on or after January 1,
52014, to the extent allowed by federal law, for nongrandfathered
6health insurance policies in the individual and small group markets,
7when an insurer uses a separate service provider to administer the
8pediatric oral care benefits required by Section 10112.27, the limit
9on annual out-of-pocket expenses shall be satisfied if both of the
10following conditions are met:

11(i) With respect to all essential health benefits except for the
12pediatric oral care benefit, the insurer complies with the
13out-of-pocket maximum requirements in Section 1302(c)(1) of
14PPACA and any federal rules, regulations, and guidance
15implementing that section.

16(ii) The separate out-of-pocket maximum for pediatric oral care
17benefits does not exceed the out-of-pocket maximum requirements
18for pediatric dental benefits established for stand-alone dental
19policies by the California Health Benefit Exchange.

20(B) The insurer shall not apply a separate out-of-pocket
21maximum to mental health or substance use disorder benefits.

end delete

22(2) For nongrandfatheredbegin delete productsend deletebegin insert health insurance policiesend insert in
23the large group market, a health insurance policy, except a
24specialized health insurance policy, that is issued, amended, or
25renewed on or after January 1, begin delete2014, end deletebegin insert2015, end insertshall provide for a limit
26on annual out-of-pocket expenses for covered benefits, including
27out-of-network emergency care. This limit shall applybegin insert onlyend insert to
28essential health benefits, as defined in Section 10112.27, that are
29covered under the policy to the extent that this provision does not
30conflict with federal law or guidance on out-of-pocket maximums
31for nongrandfatheredbegin delete productsend deletebegin insert health insurance policiesend insert in the
32large group market.begin delete For large group products for the first plan year
33commencing on or after January 1, 2014, the requirement that a
34product provide for a limit on annual out-of-pocket expenses shall
35be satisfied if both of the following apply:end delete

begin delete

36(A) The product complies with the requirements of this
37paragraph with respect to basic health care services, as defined in
38Sections 10112.27, 10144.05, 10144.51, and any requirements of
39the Paul Wellstone and Pete Domenci Mental Health Parity and
40Addiction Equity Act of 2008 (Public Law 110-343).

P29   1(B) To the extent the product includes an out-of-pocket
2maximum on coverage other than the coverage described in
3subparagraph (A), that out-of-pocket maximum also does not
4exceed the limit established pursuant to this paragraph.

5(b) The limit described in subdivision (a) shall apply to any
6copayment, coinsurance, deductible, incentive payment and any
7other form of cost sharing for all covered benefits, including
8nonformulary prescription drugs that are authorized as medically
9necessary.

end delete

10(c) begin insert(1)end insertbegin insertend insert The limit described in subdivisionbegin delete (a)end deletebegin insert (b)end insert shall not
11exceed the limit described in Section 1302(c) of PPACA and any
12subsequent rules, regulations, or guidance issued under that section.

begin insert

13(2) The limit described in subdivision (b) shall result in a total
14maximum out-of-pocket limit for all covered essential health
15benefits that shall equal the dollar amounts in effect under Section
16223(c)(2)(A)(ii) of the Internal Revenue Code of 1986 with the
17dollar amounts adjusted as specified in Section 1302(c)(1)(B) of
18PPACA.

end insert

19(d) Nothing in this section shall be construed to affect the
20reduction in cost sharing for eligiblebegin delete enrolleesend deletebegin insert insuredsend insert described
21in Section 1402 of PPACA and any subsequent rules, regulations,
22or guidance issued under that section.

23(e) begin deleteFor policy years beginning on or after January 1, 2015, if end deletebegin insertIf end insert
24an essential health benefit is offered or provided by a specialized
25health insurance policy, the total annual out-of-pocket maximum
26for allbegin insert coveredend insert essential benefits shall not exceed the limit inbegin delete this
27sectionend delete
begin insert subdivision (b)end insert. This section shall not apply to a specialized
28begin insert health insuranceend insert policy that does not offer an essential health
29benefit as defined in Section 10112.28.

begin insert

30(f) The maximum out-of-pocket limit shall apply to any
31copayment, coinsurance, deductible, and any other form of cost
32sharing for all covered benefits that meet the definition of essential
33health benefits, as defined in Section 10112.28.

end insert
begin delete

34(f)

end delete

35begin insert(g)end insert For nongrandfathered health insurance policies in the group
36market, “policy year” has the meaning set forth in Section 144.103
37of Title 45 of the Code of Federal Regulations. For
38nongrandfathered health insurance policies sold in the individual
39market, “policy year” means the calendar year.

begin delete

40(g)

end delete

P30   1begin insert(h)end insert “PPACA” means the federal Patient Protection and
2Affordable Care Act (Public Law 111-148), as amended by the
3federal Health Care and Education Reconciliation Act of 2010
4(Public Law 111-152), and any rules, regulations, or guidance
5issued thereunder.

6begin insert

begin insertSEC. 10.end insert  

end insert

begin insertSection 10112.285 is added to the end insertbegin insertInsurance Codeend insertbegin insert,
7to read:end insert

begin insert
8

begin insert10112.285.end insert  

(a) This section shall apply to nongrandfathered
9individual and group health insurance policies that provide
10coverage for essential health benefits defined in Section 10112.27
11and that are issued, amended, or renewed for the 2014 policy year.

12(b) (1) For nongrandfathered health insurance policies in the
13individual market, and to the extent allowed by federal law,
14regulations, and guidance, a health insurance policy, except a
15specialized health insurance policy, shall provide for a limit on
16annual out-of-pocket expenses for all covered benefits that meet
17the definition of essential health benefits, as defined in Section
1810112.27, including out-of-network emergency care. The total
19out-of-pocket maximum shall not exceed six thousand three
20hundred fifty dollars ($6,350) for individual coverage and twelve
21thousand seven hundred dollars ($12,700) for family coverage.

22(2) For nongrandfathered specialized health insurance policies
23in the individual market that provide the pediatric oral care benefit
24meeting the definition in Section 1302(b)(1)(j) of PPACA, the
25out-of-pocket maximum for the pediatric oral care benefit shall
26not exceed one thousand dollars ($1,000) for one child and two
27thousand dollars ($2,000) for more than one child.

28(3) A health insurance policy shall not apply a separate
29out-of-pocket maximum to mental health or substance use disorder
30benefits.

31(c) For nongrandfathered health insurance policies in the small
32group markets, and to the extent allowed by federal law,
33regulations, and guidance, a health insurance policy, except a
34specialized health insurance policy, shall provide for a limit on
35annual out-of-pocket expenses for all covered benefits that meet
36the definition of essential health benefits, as defined in Section
3710112.27, including out-of-network emergency care, as follows:

38(1) With respect to all essential health benefits, except for the
39pediatric oral care benefit, the total out-of-pocket maximum shall
40not exceed six thousand three hundred fifty dollars ($6,350) for
P31   1individual coverage and twelve thousand seven hundred dollars
2($12,700) for family coverage. For small group health insurance
3policies the total out-of-pocket maximum limit in this paragraph
4may be split between prescription drug services and all other
5essential health benefits.

6(2) The separate out-of-pocket maximum for pediatric oral care
7benefits meeting the definition in Section 1302(b)(1) of PPACA
8shall not exceed one thousand dollars ($1,000) for one child and
9two thousand dollars ($2,000) for more than one child.

10(3) A health insurance policy shall not apply a separate
11out-of-pocket maximum to mental health or substance use disorder
12benefits.

13(d) For nongrandfathered health insurance policies in the large
14group market, a health insurance policy, except a specialized
15health insurance policy, shall provide for a limit on annual
16out-of-pocket expenses for covered benefits, including
17out-of-network emergency care. This limit shall apply only to
18essential health benefits, as defined in Section 10112.27, that are
19covered under the policy. This limit shall be as follows:

20(1) The total out-of-pocket maximum shall not exceed six
21thousand three hundred fifty dollars ($6,350) for individual
22coverage or twelve thousand seven hundred dollars ($12,700) for
23family coverage with respect to basic health care services
24described in Section 10112.27, and services, except for prescription
25drugs, required under Sections 10144.5 and 10144.51.

26(2) To the extent the policy includes an out-of-pocket maximum
27on coverage other than the coverage described in paragraph (1),
28that out-of-pocket maximum shall not exceed six thousand three
29hundred fifty dollars ($6,350) for individual coverage or twelve
30thousand seven hundred dollars ($12,700) for family coverage.

31(3) An insured in a large group policy shall not be subject to
32more than two limits on annual out-of-pocket expenses for covered
33benefits that meet the definition of essential health benefits.

34(4) A health insurance policy shall not apply a separate
35out-of-pocket maximum to mental health or substance use disorder
36benefits.

37(5) This subdivision shall apply only to the extent that it does
38not conflict with federal law or guidance on out-of-pocket
39maximums for nongrandfathered policies in the large group
40market.

P32   1(e) Nothing in this section shall be construed to affect the
2reduction in cost sharing for eligible insureds described in Section
31402 of PPACA, and any subsequent rules, regulations, or
4guidance issued under that section.

5(f) The limits described in this section shall apply to any
6copayment, coinsurance, deductible, and any other form of cost
7sharing for all covered services that meet the definition of essential
8health benefits.

9(g) For nongrandfathered health insurance policies in the group
10market, “policy year” has the meaning set forth in Section 144.103
11of Title 45 of the Code of Federal Regulations. For
12nongrandfathered health insurance policies sold in the individual
13market, “policy year” means the calendar year.

14(h) “PPACA” means the federal Patient Protection and
15Affordable Care Act (Public Law 111-148), as amended by the
16federal Health Care and Education Reconciliation Act of 2010
17(Public Law 111-152), and any rules, regulations, or guidance
18issued thereunder.

19(i) This section shall remain in effect only until January 1, 2016,
20and as of that date is repealed, unless a later enacted statute, that
21is enacted before January 1, 2016, deletes or extends that date.

end insert
22

begin deleteSEC. 7.end delete
23begin insertSEC. 11.end insert  

Section 10112.29 is added to the Insurance Code, to
24read:

25

10112.29.  

(a) (1) For a small employer health insurance policy
26offered, sold, or renewed on or after January 1, 2014, the deductible
27under the policy shall not exceed:

28(A) Two thousand dollars ($2,000) in the case of a policy
29covering a single individual.

30(B) Four thousand dollars ($4,000) in the case of any other
31policy.

32(2) The dollar amounts in this section shall be indexed consistent
33with Section 1302(c)(2) of PPACA and any federal rules or
34guidance pursuant to that section.

35(3) The limitation in this subdivision shall be applied in a
36manner that does not affect the actuarial value of any small
37employer health insurance policy.

38(4) For small group products at the bronze level of coverage,
39as defined in Section 10112.295, the department may permit
40insurers to offer a higher deductible in order to meet the actuarial
P33   1value requirement of the bronze level. In making this
2determination, the department shall consider affordability of cost
3sharing for insureds and shall also consider whether insureds may
4be deterred from seeking appropriate care because of higher cost
5sharing.

6(b) Nothing in this section shall be construed to allow a policy
7to have a deductible that applies to preventive services as defined
8in PPACA.

begin insert

9(c) This section shall not apply to multiple employer welfare
10arrangements regulated pursuant to Article 4.7 (commencing with
11Section 742.20) of Chapter 1 of Part 2 of Division 1 that provide
12health care benefits to their members and that comply with small
13group health reforms unless otherwise required by federal law or
14guidance.

end insert
begin delete

15(c)

end delete

16begin insert(d)end insert “PPACA” means the federal Patient Protection and
17Affordable Care Act (Public Law 111-148), as amended by the
18federal Health Care and Education Reconciliation Act of 2010
19(Public Law 111-152), and any rules, regulations, or guidance
20issued thereunder.

21

begin deleteSEC. 8.end delete
22begin insertSEC. 12.end insert  

Section 10112.295 is added to the Insurance Code,
23to read:

24

10112.295.  

(a) Levels of coverage for the nongrandfathered
25individual market are defined as follows:

26(1) Bronze level: A health insurance policy in the bronze level
27shall provide a level of coverage that is actuarially equivalent to
2860 percent of the full actuarial value of the benefits provided under
29the policy.

30(2) Silver level: A health insurance policy in the silver level
31shall provide a level of coverage that is actuarially equivalent to
3270 percent of the full actuarial value of the benefits provided under
33the policy.

34(3) Gold level: A health insurance policy in the gold level shall
35provide a level of coverage that is actuarially equivalent to 80
36percent of the full actuarial value of the benefits provided under
37the policy.

38(4) Platinum level: A health insurance policy in the platinum
39level shall provide a level of coverage that is actuarially equivalent
P34   1to 90 percent of the full actuarial value of the benefits provided
2under the policy.

3(b) Actuarial value for nongrandfathered individual health
4insurance policies shall be determined in accordance with the
5following:

6(1) Actuarial value shall not vary by more than plus or minus
72 percent.

8(2) Actuarial value shall be determined on the basis of essential
9health benefits as defined in Section 10112.27 and as provided to
10a standard, nonelderly population. For this purpose, a standard
11population shall not include those receiving coverage through the
12Medi-Cal or Medicare programs.

13(3) The department may use the actuarial value methodology
14developed consistent with Section 1302(d) of PPACA.

15(4) The actuarial value for pediatric dental benefits, whether
16offered by a major medical policy or a specialized health insurance
17policy, shall be consistent with federal law and guidance applicable
18to the policy type.

19(5) The department, in consultation with the Department of
20Managed Health Care and the Exchange, shall consider whether
21to exercise state-level flexibility with respect to the actuarial value
22calculator in order to take into account the unique characteristics
23of the California health care coverage market, including the
24prevalence of health insurance policies, total cost of care paid for
25by the health insurer, price of care, patterns of service utilization,
26and relevant demographic factors.

27(c) (1) A catastrophic policy is a health insurance policy that
28provides no benefits for any plan year until the insured has incurred
29cost-sharing expenses in an amount equal to the annual limit on
30out-of-pocket costs as specified in Section 10112.28 except that
31it shall provide coverage for at least three primary care visits. A
32carrier that is not participating in the Exchange shall not offer,
33market, or sell a catastrophic plan in the individual market.

34(2) A catastrophic policy may be offered only in the individual
35market and only if consistent with this paragraph. Catastrophic
36policies may be offered only if either of the following apply:

37(A) The individual purchasing the policy has not yet attained
3830 years of age before the beginning of the plan year.

39(B) The individual has a certificate of exemption from Section
405000(A) of the Internal Revenue Code because the individual is
P35   1not offered affordable coverage or because the individual faces
2hardship.

begin insert

3(d) This section shall apply to a policy of health insurance, as
4defined in subdivision (b) of Section 106, that covers any essential
5health benefit as defined in Section 10112.27. This section shall
6not apply to a specialized health insurance policy that does not
7cover any of the essential health benefits.

end insert
begin delete

8(d)

end delete

9begin insert(e)end insert “PPACA” means the federal Patient Protection and
10Affordable Care Act (Public Law 111-148), as amended by the
11federal Health Care and Education Reconciliation Act of 2010
12(Public Law 111-152), and any rules, regulations, or guidance
13issued thereunder.

14

begin deleteSEC. 9.end delete
15begin insertSEC. 13.end insert  

Section 10112.297 is added to the Insurance Code,
16to read:

17

10112.297.  

(a) Levels of coverage for the nongrandfathered
18small group market are defined as follows:

19(1) Bronze level: A health insurance policy in the bronze level
20shall provide a level of coverage that is actuarially equivalent to
2160 percent of the full actuarial value of the benefits provided under
22the policy.

23(2) Silver level: A health insurance policy in the silver level
24shall provide a level of coverage that is actuarially equivalent to
2570 percent of the full actuarial value of the benefits provided under
26the policy.

27(3) Gold level: A health insurance policy in the gold level shall
28provide a level of coverage that is actuarially equivalent to 80
29percent of the full actuarial value of the benefits provided under
30the policy.

31(4) Platinum level: A health insurance policy in the platinum
32level shall provide a level of coverage that is actuarially equivalent
33to 90 percent of the full actuarial value of the benefits provided
34under the policy.

35(b) Actuarial value for nongrandfathered small employer health
36insurance policies shall be determined in accordance with the
37following:

38(1) Actuarial value shall not vary by more than plus or minus
392 percent.

P36   1(2) Actuarial value shall be determined on the basis of essential
2health benefits as defined in paragraph (1) of subdivision (a) of
3Section 10112.27 and as provided to a standard, nonelderly
4population. For this purpose, a standard population shall not include
5those receiving coverage through the Medi-Cal or Medicare
6programs.

7(3) The department may use the actuarial value methodology
8developed consistent with Section 1302(d) of PPACA.

9(4) The actuarial value for pediatric dental benefits, whether
10offered by a major medical policy or a specialized health insurance
11policy, shall be consistent with federal law and guidance applicable
12to the policy type.

13(5) The department, in consultation with the Department of
14Managed Health Care and the Exchange, shall consider whether
15to exercise state-level flexibility with respect to the actuarial value
16calculator in order to take into account the unique characteristics
17of the California health care coverage market, including the
18prevalence of health insurance policies, total cost of care paid for
19by the health insurer, price of care, patterns of service utilization,
20and relevant demographic factors.

21(6) Employer contributions toward health reimbursement
22accounts and health savings accounts shall count toward the
23actuarial value of the product in the manner specified in federal
24rules and guidance.

25(c) “PPACA” means the federal Patient Protection and
26Affordable Care Act (Public Law 111-148), as amended by the
27federal Health Care and Education Reconciliation Act of 2010
28(Public Law 111-152), and any rules, regulations, or guidance
29issued thereunder.

30

begin deleteSEC. 10.end delete
31begin insertSEC. 14.end insert  

Section 10112.7 is added to the Insurance Code, to
32read:

33

10112.7.  

(a) A group or individual health insurance policy
34issued, amended, or renewed on or after January 1, 2014, that
35provides or covers any benefits with respect to services in an
36emergency department of a hospital shall cover emergency services
37as follows:

38(1) Without the need for any prior authorization determination.

39(2) Whether the health care provider furnishing the services is
40a participating provider with respect to those services.

P37   1(3) In a manner so that, if the services are provided to an insured:

2(A) By a nonparticipating health care provider with or without
3prior authorization; or

4(B) (i) The services will be provided without imposing any
5requirement under the policy for prior authorization of services or
6any limitation on coverage where the provider of services does
7not have a contractual relationship with the insurer for the
8providing of services that is more restrictive than the requirements
9or limitations that apply to emergency department services received
10from providers who do have such a contractual relationship with
11the insurer; and

12(ii) If the services are provided to an insured out-of-network,
13the cost-sharing requirement, expressed as a copayment amount
14or coinsurance rate, is the same requirement that would apply if
15the services were provided in-network.

16(b) For the purposes of this section, the term “emergency
17services” means, with respect to an emergency medical condition:

18(1) A medical screening examination that is within the capability
19of the emergency department of a hospital, including ancillary
20services routinely available to the emergency department to
21evaluate that emergency medical condition.

22(2) Within the capabilities of the staff and facilities available at
23the hospital, further medical examination and treatment as are
24required under Section 1867(e)(3) of the federal Social Security
25Act (42 U.S.C. 1395dd(e)(3)) to stabilize the patient.

26

begin deleteSEC. 11.end delete
27begin insertSEC. 15.end insert  

No reimbursement is required by this act pursuant
28to Section 6 of Article XIII B of the California Constitution because
29the only costs that may be incurred by a local agency or school
30district will be incurred because this act creates a new crime or
31infraction, eliminates a crime or infraction, or changes the penalty
32for a crime or infraction, within the meaning of Section 17556 of
33the Government Code, or changes the definition of a crime within
34the meaning of Section 6 of Article XIII B of the California
35Constitution.



O

    93