Senate Bill No. 780

Introduced by Senator Jackson

February 22, 2013

An act to amend Sections 10123.12, 10601, and 10604 of, and to add Section 10133.57 to, the Insurance Code, relating to insurance.

LEGISLATIVE COUNSEL’S DIGEST

SB 780, as introduced, Jackson. Disability insurance.

Existing law provides for the regulation of health insurers by the Department of Insurance. Under existing law, a health insurer may contract with providers for alternative rates of payment. Existing law requires those insurers to file a policy with the department describing how the insurer facilitates the continuity of care for new insureds under group policies receiving services for an acute condition from a noncontracting provider. Existing law also requires those health insurers to, at the request of an insured, arrange for the completion of covered services by a terminated provider if the insured is undergoing treatment for certain conditions, as specified.

The bill would require a health insurer to notify the department at least 30 days prior to terminating a contract with a provider group or general acute care hospital to provide services at alternative rates of payment if the contract termination would result in a material change to the provider network, and would require the insurer to send written notice, at least 15 days prior to the termination date of the contract, to all insureds who have obtained services from the provider group or general acute hospital within the last 6 months, as specified.

Existing law requires disability insurance policies to include a disclosure form that contains specified information, including the principal benefits and coverage of the policy, the exceptions, reductions, and limitations that apply to the policy, and a statement, with respect to health insurance policies, describing how participation in the policy may affect the choice of physician, hospital, or health care providers, and describing the extent of financial liability that may be incurred if care is furnished by a nonparticipating provider.

With respect to health insurance policies, this bill would require the disclosure form to include additional information, including conditions and procedures for cancellation, rescission, or nonrenewal, a description of the limitations on the insured’s choice of provider, and, with respect to insurers that contract for alternate rates of payment, a statement describing the basic method of reimbursement made to its participating providers, as specified. The bill would also require the first page of the disclosure form for health insurance policies to include other specified information. The bill would require a health insurer, medical group, or participating provider that uses or receives financial bonuses or other incentives to provide a written summary of specified information to any requesting person.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 10123.12 of the Insurance Code is
amended to read:

10123.12.  

begin insert (a) end insert begin insert   end insert Every health insurer, including those insurers
that contract for alternative rates of payment pursuant to Section
10133, and every self-insured employee welfare benefit plan that
will affect the choice of physician, hospital, or other health care
providers begin insert , end insert shall include within its disclosure form and within its
evidence or certificate of coverage a statement clearly describing
how participation in the policy or plan may affect the choice of
physician, hospital, or other health care providers, and describing
the nature and extent of the financial liability that is, or that may
be, incurred by the insured, enrollee, or covered dependents if care
is furnished by a provider that does not have a contract with the
insurer or plan to provide service at alternative rates of payment
pursuant to Section 10133. The form shall clearly inform
prospective insureds or plan enrollees that participation in the
policy or plan will affect the person’s choice in this regard by
placing the following statement in a conspicuous place on all
material required to be given to prospective insureds or plan
enrollees including promotional and descriptive material, disclosure
forms, and certificates and evidences of coverage:

 
PLEASE READ THE FOLLOWING INFORMATION SO
YOU WILL KNOW FROM WHOM OR WHAT GROUP OF
PROVIDERS HEALTH CARE MAY BE OBTAINED

It is not the intent of this section to require that the names of
individual health care providers be enumerated to prospective
insureds or enrollees.

If a health insurer providing coverage for hospital, medical, or
surgical expenses provides a list of facilities to patients or
contracting providers, the insurer shall include within the begin delete provider end delete
listing a notification that insureds or enrollees may contact the
insurer in order to obtain a list of the facilities with which the
health insurer is contracting for subacute care and/or transitional
inpatient care.

begin insert

(b) Every health insurer that contracts for alternative rates of
payment pursuant to Section 10133 shall include within its
disclosure form a statement clearly describing the basic method
of reimbursement, including the scope and general methods of
payment, made to its contracting providers of health care services,
and whether financial bonuses or any other incentives are used.
The disclosure form shall indicate that, if an insured wishes to
know more about these issues, the insured may request additional
information from the insurer, the insured’s provider, or the
provider’s medical group regarding the information required
pursuant to subdivision (c).

end insert begin insert

(c) If a health insurer, medical group, or participating health
care provider uses or receives financial bonuses or any other
incentives, the insurer, medical group, or health care provider
shall provide a written summary to any person who requests it
that includes both of the following:

end insert begin insert

(1) A general description of the bonus and any other incentive
arrangements used in its compensation agreements. Nothing in
this paragraph shall be construed to require disclosure of trade
secrets or commercial or financial information that is privileged
or confidential, such as payment rates, as determined by the
commissioner, pursuant to state law.

end insert begin insert

(2) A description regarding whether, and in what manner, the
bonuses and any other incentives are related to a provider’s use
of referral services.

end insert begin insert

(d) The statements and written information provided pursuant
to subdivisions (b) and (c) shall be communicated in clear and
simple language that enables consumers to evaluate and compare
health insurance policies.

end insert

SEC. 2.  

Section 10133.57 is added to the Insurance Code, to
read:

10133.57.  

(a) At least 30 days prior to the termination date of
a contract between a health insurer and a provider group or a
general acute care hospital to provide services at alternative rates
of payment pursuant to Section 10133, the insurer shall submit a
written notice notifying the department of the termination if the
termination of the contract would result in a material change to
the insurer’s provider network, as defined by the department by
regulation. The insurer shall include with that notice the written
notice the insurer proposes to send to affected insureds pursuant
to subdivision (b).

(b) At least 15 days prior to the termination date of a contract
between a health insurer and a provider group or a general acute
care hospital to provide services at alternative rates of payment
pursuant to Section 10133, the insurer shall send the written notice
described in subdivision (a) by United States mail to all insureds
who have obtained services from the provider group or general
acute care hospital within the preceding six months.

(c) If an individual provider terminates his or her contract or
employment with a provider group that contracts with a health
insurer and that termination is subject to the requirements of
subdivision (b), the insurer may require that the provider group
send the notice required by subdivision (b).

(d) If, after sending the notice required by subdivision (b), a
health insurer reaches an agreement with a terminated provider
group or general acute care hospital to renew or enter into a new
contract or to not terminate its contract, the insurer shall send a
written notice notifying the affected covered lives that the provider
group or hospital remains in their provider network.

(e) A health insurer or a provider group shall include in the
written notice sent pursuant to subdivision (b) or (c) the following
information in not less than 12-point type:

(1) The name of the terminated provider group or general acute
care hospital, or in the case of a notice sent pursuant to subdivision
(c), the name of the terminated individual provider.

(2) The date of the pending contract termination.

(3) A description explaining how to access a list of contracted
providers in the insured’s provider network.

(4) A statement that the insured may contact the insurer’s
customer service department to request completion of care for an
ongoing course of treatment from a terminated provider and a
telephone number for further explanation.

(5) A statement informing the insured that he or she may be
required to pay a larger portion of costs if the insured continues
to use the terminated provider.

(6) The following statement:

“If you have been receiving care from a health care provider,
you may have a right to keep your provider for a designated time
period. Please contact your insurer’s customer service department,
and if you have further questions, you are encouraged to contact
the Department of Insurance, which protects insurance consumers,
by telephone at its toll-free number, 800-927-HELP (4357), or at
a TDD number for the hearing impaired at 800-482-4833, or online
at www.insurance.ca.gov.”

(f) The commissioner may adopt regulations in accordance with
the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code) that are necessary to implement the provisions of this
section.

SEC. 3.  

Section 10601 of the Insurance Code is amended to
read:

10601.  

As used in this chapter:

(a) “Benefits and coverage” means the accident, sickness begin insert , end insert or
disability indemnity available under a policy of disability insurance.

(b) “Exception” means any provision in a policy whereby
coverage for a specified hazard or condition is entirely eliminated.

(c) “Reduction” means any provision in a policy begin delete which end delete begin insert that end insert
reduces the amount of a policy benefit to some amount or period
less than would be otherwise payable for medically authorized
expenses or services had begin delete such a end delete begin insert the end insert reduction not been used.

(d) “Limitation” means any provision other than an exception
or a reduction begin delete which end delete begin insert that end insert restricts coverage under the policy.

(e) “Presenting for examination or sale” means either (1)
publication and dissemination of any brochure, mailer,
advertisement, or form begin delete which end delete begin insert that end insert constitutes a presentation of the
provisions of the policy and begin delete which end delete begin insert that end insert provides a policy
enrollment or application form, or (2) consultations or discussions
between prospective beneficiaries or their contract agents and
employees or agents of disability insurers, when begin delete such end delete begin insert those end insert
consultations or discussions include presentation of formal,
organized information about the policy begin delete which end delete begin insert that end insert is intended to
influence or inform the prospective insured or beneficiary, such
as brochures, summaries, charts, slides, or other modes of
information in lieu of or in addition to the policy itself.

(f) “Disability insurance” means every policy of disability
insurance begin delete , end delete begin insert and end insert self-insured employee welfare benefit plan begin delete , and
nonprofit hospital service plan end delete issued, delivered, or entered into
pursuant to or described in Chapter 1 (commencing with Section
10110) begin delete , end delete begin insert or end insert Chapter 4 (commencing with Section 10270) begin delete , or Chapter
11A (commencing with Section 11491) end delete of this part.

(g) “Insurer” means every insurer transacting disability
insurance begin delete , end delete begin insert and end insert every self-insured employee welfare plan begin delete , and every
nonprofit hospital service plan end delete specified in subdivision begin delete (e) end delete begin insert (f) end insert .

(h) “Disclosure form” means the standard supplemental
disclosure form required pursuant to Section 10603.

begin insert

(i) “Small group health insurance policy” means a group health
insurance policy issued to a small employer, as defined in Section
10700, 10753, or 10755.

end insert

SEC. 4.  

Section 10604 of the Insurance Code is amended to
read:

10604.  

The disclosure form shall include begin insert at least end insert the following
information, in concise and specific terms, relative to the disability
insurance policy begin insert , together with additional information as the
commissioner may require in connection with the policy end insert :

(a) The applicable category or categories of coverage provided
by the policy, from among the following:

(1) Basic hospital expense coverage.

(2) Basic medical-surgical expense coverage.

(3) Hospital confinement indemnity coverage.

(4) Major medical expense coverage.

(5) Disability income protection coverage.

(6) Accident only coverage.

(7) Specified disease or specified accident coverage.

(8)  begin delete Such other end delete begin insert Other end insert categories as the commissioner may
prescribe.

(b) The principal benefits and coverage of the disability
insurance policy begin insert , including coverage for acute care and subacute
care if the policy is a health insurance policy, as defined in Section
106 end insert .

(c) The exceptions, reductions, and limitations that apply to
begin delete such end delete begin insert the end insert policy.

(d) A summary, including a citation of the relevant contractual
provisions, of the process used to authorize begin insert , modify, delay, end insert or deny
payments for services under the coverage provided by the policy
including coverage for subacute care, transitional inpatient care,
or care provided in skilled nursing facilities. This subdivision shall
only apply to policies of begin delete disability insurance that cover hospital,
medical, or surgical expenses end delete begin insert health insurance as defined in Section
106 end insert .

(e) The full premium cost of begin delete such end delete begin insert the end insert policy.

(f) Any copayment, coinsurance, or deductible requirements
that may be incurred by the insured or his begin insert or her end insert family in
obtaining coverage under the policy.

(g) The terms under which the policy may be renewed by the
insured, including any reservation by the insurer of any right to
change premiums.

(h) A statement that the disclosure form is a summary only, and
that the policy itself should be consulted to determine governing
contractual provisions.

begin insert

(i) For a health insurance policy, as defined in Section 106, all
of the following:

end insert begin insert

(1) A notice on the first page of the disclosure form that
conforms with all of the following conditions:

end insert begin insert

(A) (i) States that the form discloses the terms and conditions
of coverage.

end insert begin insert

(ii) States, with respect to individual health insurance policies,
small group health insurance policies, and any group health
insurance policies, that the applicant has a right to view the
disclosure form and policy prior to beginning coverage under the
policy, and, if the policy does not accompany the disclosure form,
the notice shall specify where the policy can be obtained prior to
beginning coverage.

end insert begin insert

(B) Includes a statement that the disclosure and the policy
should be read completely and carefully and that individuals with
special health care needs should read carefully those sections that
apply to them.

end insert begin insert

(C) Includes the insurer’s telephone number or numbers that
may be used by an applicant to receive additional information
about the benefits of the policy, or states where those telephone
number or numbers are located in the disclosure form.

end insert begin insert

(D) For individual health insurance policies and small group
health insurance policies, states where a health policy benefits
and coverage matrix is located.

end insert begin insert

(E) Is printed in type no smaller than that used for the remainder
of the disclosure form and is displayed prominently on the page.

end insert begin insert

(2) A statement as to when benefits shall cease in the event of
nonpayment of premium and the effect of nonpayment upon an
insured who is hospitalized or undergoing treatment for an ongoing
condition.

end insert begin insert

(3) To the extent that the policy or insurer permits a free choice
of provider to its insureds, the statement shall disclose, consistent
with Section 10123.12, the nature and extent of choice permitted
and the financial liability that is, or may be, incurred by the
insured, covered dependents, or a third party by reason of the
exercise of that choice.

end insert begin insert

(4) For group health insurance policies, including small group
health insurance policies, a summary of the terms and conditions
under which insureds may remain in the policy in the event the
group ceases to exist, the group policy is terminated, an individual
insured leaves the group, or the insureds’ eligibility status changes.

end insert begin insert

(5) If the policy utilizes arbitration to settle disputes, a statement
of that fact. If the policy requires binding arbitration, a disclosure
pursuant to Section 10123.19.

end insert begin insert

(6) A description of any limitations on the insured’s choice of
primary care physician, specialty care physician, or nonphysician
health care practitioner, based on service area and limitations on
the insured’s choice of acute care hospital care, subacute or
transitional inpatient care, or skilled nursing facility.

end insert begin insert

(7) Conditions and procedures for cancellation, rescission, or
nonrenewal.

end insert begin insert

(8) A description as to how an insured may request continuity
of care as required by Sections 10133.55 and 10133.56, and
request a second opinion pursuant to Section 10123.68.

end insert begin insert

(9) Information concerning the right of an insured to request
an independent medical review in accordance with Article 3.5
(commencing with Section 10169) of Chapter 1.

end insert begin insert

(10) A notice as required by Section 791.04.

end insert