BILL NUMBER: SB 1034	CHAPTERED
	BILL TEXT

	CHAPTER  195
	FILED WITH SECRETARY OF STATE  AUGUST 15, 2014
	APPROVED BY GOVERNOR  AUGUST 15, 2014
	PASSED THE SENATE  AUGUST 4, 2014
	PASSED THE ASSEMBLY  JUNE 30, 2014
	AMENDED IN ASSEMBLY  JUNE 26, 2014
	AMENDED IN SENATE  APRIL 21, 2014

INTRODUCED BY   Senator Monning

                        FEBRUARY 14, 2014

   An act to amend Sections 1357.51, 1357.514, 1357.600, and 1357.614
of, and to repeal and add Sections 1357.506 and 1357.607 of, the
Health and Safety Code, and to amend Sections 10198.7, 10753.05,
10755, and 10755.05 of, and to repeal and add Sections 10753.08 and
10755.08 of, the Insurance Code, relating to health care coverage.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1034, Monning. Health care coverage: waiting periods.
   Existing law, the federal Patient Protection and Affordable Care
Act (PPACA), enacts various health care coverage market reforms that
take effect with respect to plan years on or after January 1, 2014.
Among other things, PPACA prohibits a group health plan and a health
insurance issuer offering group health insurance coverage from
applying a waiting period that exceeds 90 days.
   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.
Existing law authorizes a group health care service plan contract and
a group health insurance policy, as defined, to apply a waiting
period of up to 60 days as a condition of employment if applied
equally to all eligible employees and dependents.
   This bill would prohibit those group contracts and policies from
imposing any waiting or affiliation period, as defined, and would
make related conforming changes. Because a willful violation of the
bill's requirements by a health care service plan would be a crime,
the bill would impose a state-mandated local program.
   Existing law provides for the regulation of grandfathered small
employer health care service plan contracts and health insurance
policies, as defined. Existing law requires that those contracts and
policies be fairly and affirmatively renewed and prohibits construing
the provisions regulating those contracts and policies from limiting
enrollment in a contract or policy to open enrollment periods, as
specified. Existing law requires the employer offering the plan to
send a written notice to an eligible employee or dependent who fails
to enroll during an open enrollment period that he or she may be
excluded from coverage for a specified period of time.
   This bill would instead require the notice to inform the eligible
employee or dependent that he or she may be excluded from eligibility
for coverage until the next open enrollment period.
   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.
   This bill would incorporate additional changes to Section 10753.05
of the Insurance Code proposed by SB 959 that would become operative
if this bill and SB 959 are both enacted and this bill is enacted
last.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature hereby finds and declares the
following:
   (a) In enacting this legislation, it is the intent of the
Legislature to prohibit a health care service plan or health insurer
offering group coverage from imposing a separate waiting or
affiliation period in addition to any waiting period imposed by an
employer for a group health plan on an otherwise eligible employee or
dependent.
   (b) The Legislature further intends, in enacting this legislation,
to permit a health care service plan or health insurer offering
group coverage to administer a waiting period imposed by a plan
sponsor, as defined in Section 1002 of Title 29 of the United States
Code, if consistent with Section 2708 of the federal Public Health
Service Act (42 U.S.C. Sec. 300gg-7).
  SEC. 2.  Section 1357.51 of the Health and Safety Code is amended
to read:
   1357.51.  (a) A health benefit plan for group coverage shall not
impose any preexisting condition provision or waivered condition
provision upon any enrollee.
   (b) (1) A nongrandfathered health benefit plan for individual
coverage shall not impose any preexisting condition provision or
waivered condition provision upon any enrollee.
   (2) A grandfathered health benefit plan for individual coverage
shall not exclude coverage on the basis of a waivered condition
provision or preexisting condition provision for a period greater
than 12 months following the enrollee's effective date of coverage,
nor limit or exclude coverage for a specific enrollee by type of
illness, treatment, medical condition, or accident, except for
satisfaction of a preexisting condition provision or waivered
condition provision pursuant to this article. Waivered condition
provisions or preexisting condition provisions contained in
individual grandfathered health benefit plans may relate only to
conditions for which medical advice, diagnosis, care, or treatment,
including use of prescription drugs, was recommended or received from
a licensed health practitioner during the 12 months immediately
preceding the effective date of coverage.
   (3) If Section 5000A of the Internal Revenue Code, as added by
Section 1501 of PPACA, is repealed or amended to no longer apply to
the individual market, as defined in Section 2791 of the Public
Health Service Act (42 U.S.C. Sec. 300gg-91), paragraph (1) shall
become inoperative 12 months after the date of that repeal or
amendment and thereafter paragraph (2) shall apply also to
nongrandfathered health benefit plans for individual coverage.
   (4) In determining whether a preexisting condition provision or a
waivered condition provision applies to an individual under this
subdivision, a plan shall credit the time the individual was covered
under creditable coverage, provided that the individual becomes
eligible for coverage under the succeeding plan contract within 62
days of termination of prior coverage and applies for coverage under
the succeeding plan within the applicable enrollment period.
   (c) A health benefit plan for group or individual coverage shall
not impose any waiting or affiliation period.
  SEC. 3.  Section 1357.506 of the Health and Safety Code is
repealed.
  SEC. 4.  Section 1357.506 is added to the Health and Safety Code,
to read:
   1357.506.  A small employer health care service plan contract
shall not impose a preexisting condition provision or a waiting or
affiliation period upon any individual.
  SEC. 5.  Section 1357.514 of the Health and Safety Code is amended
to read:
   1357.514.  In connection with the offering for sale of a small
employer health care service plan contract subject to this article,
each plan shall make a reasonable disclosure, as part of its
solicitation and sales materials, of the following:
   (a) The provisions concerning the plan's right to change premium
rates and the factors other than provision of services experience
that affect changes in premium rates. The plan shall disclose that
claims experience cannot be used.
   (b) Provisions relating to the guaranteed issue and renewal of
contracts.
   (c) A statement that no preexisting condition provisions shall be
allowed.
   (d) Provisions relating to the small employer's right to apply for
any small employer health care service plan contract written,
issued, or administered by the plan at the time of application for a
new health care service plan contract, or at the time of renewal of a
health care service plan contract, consistent with the requirements
of PPACA.
   (e) The availability, upon request, of a listing of all the plan's
contracts and benefit plan designs offered, both inside and outside
the Exchange, to small employers, including the rates for each
contract.
   (f) At the time it offers a contract to a small employer, each
plan shall provide the small employer with a statement of all of its
small employer health care service plan contracts, including the
rates for each plan contract, in the service area in which the
employer's employees and eligible dependents who are to be covered by
the plan contract work or reside. For purposes of this subdivision,
plans that are affiliated plans or that are eligible to file a
consolidated income tax return shall be treated as one health plan.
   (g) Each plan shall do all of the following:
   (1) Prepare a brochure that summarizes all of its plan contracts
offered to small employers and to make this summary available to any
small employer and to solicitors upon request. The summary shall
include for each contract information on benefits provided, a generic
description of the manner in which services are provided, such as
how access to providers is limited, benefit limitations, required
copayments and deductibles, and a telephone number that can be called
for more detailed benefit information. Plans are required to keep
the information contained in the brochure accurate and up to date
and, upon updating the brochure, send copies to solicitors and
solicitor firms with whom the plan contracts to solicit enrollments
or subscriptions.
   (2) For each contract, prepare a more detailed evidence of
coverage and make it available to small employers, solicitors, and
solicitor firms upon request. The evidence of coverage shall contain
all information that a prudent buyer would need to be aware of in
making contract selections.
   (3) Provide copies of the current summary brochure to all
solicitors and solicitor firms contracting with the plan to solicit
enrollments or subscriptions from small employers.
   For purposes of this subdivision, plans that are affiliated plans
or that are eligible to file a consolidated income tax return shall
be treated as one health plan.
   (h) Every solicitor or solicitor firm contracting with one or more
plans to solicit enrollments or subscriptions from small employers
shall do all of the following:
   (1) When providing information on contracts to a small employer
but making no specific recommendations on particular plan contracts:
   (A) Advise the small employer of the plan's obligation to sell to
any small employer any small employer health care service plan
contract, consistent with PPACA, and provide the small employer, upon
request, with the actual rates that would be charged to that
employer for a given contract.
   (B) Notify the small employer that the solicitor or solicitor firm
will procure rate and benefit information for the small employer on
any plan contract offered by a plan whose contract the solicitor
sells.
   (C) Notify the small employer that upon request the solicitor or
solicitor firm will provide the small employer with the summary
brochure required under paragraph (1) of subdivision (g) for any plan
contract offered by a plan with which the solicitor or solicitor
firm has contracted to solicit enrollments or subscriptions.
   (D) Notify the small employer of the availability of coverage and
the availability of tax credits for certain employers consistent with
PPACA and state law, including any rules, regulations, or guidance
issued in connection therewith.
   (2) When recommending a particular benefit plan design or designs,
advise the small employer that, upon request, the agent will provide
the small employer with the brochure required by paragraph (1) of
subdivision (g) containing the benefit plan design or designs being
recommended by the agent or broker.
   (3) Prior to filing an application for a small employer for a
particular contract:
   (A) For each of the plan contracts offered by the plan whose
contract the solicitor or solicitor firm is offering, provide the
small employer with the benefit summary required in paragraph (1) of
subdivision (g) and the premium for that particular employer.
   (B) Notify the small employer that, upon request, the solicitor or
solicitor firm will provide the small employer with an evidence of
coverage brochure for each contract the plan offers.
   (C) Obtain a signed statement from the small employer
acknowledging that the small employer has received the disclosures
required by this section.
  SEC. 6.  Section 1357.600 of the Health and Safety Code is amended
to read:
   1357.600.  As used in this article, the following definitions
shall apply:
   (a) "Dependent" means the spouse or registered domestic partner,
or child, of an eligible employee, subject to applicable terms of the
health care service plan contract covering the employee, and
includes dependents of guaranteed association members if the
association elects to include dependents under its health coverage at
the same time it determines its membership composition pursuant to
subdivision (n).
   (b) "Eligible employee" means either of the following:
   (1) Any permanent employee who is actively engaged on a full-time
basis in the conduct of the business of the small employer with a
normal workweek of an average of 30 hours per week over the course of
a month, at the small employer's regular places of business, who has
met any statutorily authorized applicable waiting period
requirements. The term includes sole proprietors or partners of a
partnership, if they are actively engaged on a full-time basis in the
small employer's business and included as employees under a health
care service plan contract of a small employer, but does not include
employees who work on a part-time, temporary, or substitute basis. It
includes any eligible employee, as defined in this paragraph, who
obtains coverage through a guaranteed association. Employees of
employers purchasing through a guaranteed association shall be deemed
to be eligible employees if they would otherwise meet the definition
except for the number of persons employed by the employer. Permanent
employees who work at least 20 hours but not more than 29 hours are
deemed to be eligible employees if all four of the following apply:
   (A) They otherwise meet the definition of an eligible employee
except for the number of hours worked.
   (B) The employer offers the employees health coverage under a
health benefit plan.
   (C) All similarly situated individuals are offered coverage under
the health benefit plan.
   (D) The employee must have worked at least 20 hours per normal
workweek for at least 50 percent of the weeks in the previous
calendar quarter. The health care service plan may request any
necessary information to document the hours and time period in
question, including, but not limited to, payroll records and employee
wage and tax filings.
   (2) Any member of a guaranteed association as defined in
subdivision (n).
   (c) "In force business" means an existing health benefit plan
contract issued by the plan to a small employer.
   (d) "Late enrollee" means an eligible employee or dependent who
has declined enrollment in a health benefit plan offered by a small
employer at the time of the initial enrollment period provided under
the terms of the health benefit plan and who subsequently requests
enrollment in a health benefit plan of that small employer, provided
that the initial enrollment period shall be a period of at least 30
days. It also means any member of an association that is a guaranteed
association as well as any other person eligible to purchase through
the guaranteed association when that person has failed to purchase
coverage during the initial enrollment period provided under the
terms of the guaranteed association's plan contract and who
subsequently requests enrollment in the plan, provided that the
initial enrollment period shall be a period of at least 30 days.
However, an eligible employee, any other person eligible for coverage
through a guaranteed association pursuant to subdivision (n), or an
eligible dependent shall not be considered a late enrollee if any of
the following is applicable:
   (1) The individual meets all of the following requirements:
   (A) He or she was covered under another employer health benefit
plan, the Healthy Families Program, the Access for Infants and
Mothers (AIM) Program, the Medi-Cal program, or coverage through the
California Health Benefit Exchange at the time the individual was
eligible to enroll.
   (B) He or she certified at the time of the initial enrollment that
coverage under another employer health benefit plan, the Healthy
Families Program, the AIM Program, the Medi-Cal program, or coverage
through the California Health Benefit Exchange was the reason for
declining enrollment, provided that, if the individual was covered
under another employer health benefit plan, including a plan offered
through the California Health Benefit Exchange, the individual was
given the opportunity to make the certification required by this
subdivision and was notified that failure to do so could result in
later treatment as a late enrollee.
   (C) He or she has lost or will lose coverage under another
employer health benefit plan as a result of termination of employment
of the individual or of a person through whom the individual was
covered as a dependent, change in employment status of the individual
or of a person through whom the individual was covered as a
dependent, termination of the other plan's coverage, cessation of an
employer's contribution toward an employee's or dependent's coverage,
death of the person through whom the individual was covered as a
dependent, legal separation, or divorce; or he or she has lost or
will lose coverage under the Healthy Families Program, the AIM
Program, the Medi-Cal program, or coverage through the California
Health Benefit Exchange.
   (D) He or she requests enrollment within 30 days after termination
of coverage or employer contribution toward coverage provided under
another employer health benefit plan, or requests enrollment within
60 days after termination of Medi-Cal program coverage, AIM Program
coverage, Healthy Families Program coverage, or coverage through the
California Health Benefit Exchange.
   (2) The employer offers multiple health benefit plans and the
employee elects a different plan during an open enrollment period.
   (3) A court has ordered that coverage be provided for a spouse or
minor child under a covered employee's health benefit plan.
   (4) (A) In the case of an eligible employee, as defined in
paragraph (1) of subdivision (b), the plan cannot produce a written
statement from the employer stating that the individual or the person
through whom the individual was eligible to be covered as a
dependent, prior to declining coverage, was provided with, and
signed, acknowledgment of an explicit written notice in boldface type
specifying that failure to elect coverage during the initial
enrollment period permits the plan to impose, at the time of the
individual's later decision to elect coverage, an exclusion from
eligibility for coverage until the next open enrollment period,
unless the individual meets the criteria specified in paragraph (1),
(2), or (3). This exclusion from eligibility for coverage shall not
be considered a waiting period in violation of Section 1357.51 or
1357.607.
   (B) In the case of an association member who did not purchase
coverage through a guaranteed association, the plan cannot produce a
written statement from the association stating that the association
sent a written notice in boldface type to all potentially eligible
association members at their last known address prior to the initial
enrollment period informing members that failure to elect coverage
during the initial enrollment period permits the plan to impose, at
the time of the member's later decision to elect coverage, an
exclusion from eligibility for coverage until the next open
enrollment period, unless the individual meets the requirements of
subparagraphs (A), (C), and (D) of paragraph (1) or meets the
requirements of paragraph (2) or (3). This exclusion from eligibility
for coverage shall not be considered a waiting period in violation
of Section 1357.51 or 1357.607.
   (C) In the case of an employer or person who is not a member of an
association, was eligible to purchase coverage through a guaranteed
association, and did not do so, and would not be eligible to purchase
guaranteed coverage unless purchased through a guaranteed
association, the employer or person can demonstrate that he or she
meets the requirements of subparagraphs (A), (C), and (D) of
paragraph (1), or meets the requirements of paragraph (2) or (3), or
that he or she recently had a change in status that would make him or
her eligible and that application for enrollment was made within 30
days of the change.
   (5) The individual is an employee or dependent who meets the
criteria described in paragraph (1) and was under a COBRA
continuation provision and the coverage under that provision has been
exhausted. For purposes of this section, the definition of "COBRA"
set forth in subdivision (e) of Section 1373.621 shall apply.
   (6) The individual is a dependent of an enrolled eligible employee
who has lost or will lose his or her coverage under the Healthy
Families Program, the AIM Program, the Medi-Cal program, or a health
benefit plan offered through the California Health Benefit Exchange
and requests enrollment within 60 days after termination of that
coverage.
   (7) The individual is an eligible employee who previously declined
coverage under an employer health benefit plan, including a plan
offered through the California Health Benefit Exchange, and who has
subsequently acquired a dependent who would be eligible for coverage
as a dependent of the employee through marriage, birth, adoption, or
placement for adoption, and who enrolls for coverage under that
employer health benefit plan on his or her behalf and on behalf of
his or her dependent within 30 days following the date of marriage,
birth, adoption, or placement for adoption, in which case the
effective date of coverage shall be the first day of the month
following the date the completed request for enrollment is received
in the case of marriage, or the date of birth, or the date of
adoption or placement for adoption, whichever applies. Notice of the
special enrollment rights contained in this paragraph shall be
provided by the employer to an employee at or before the time the
employee is offered an opportunity to enroll in plan coverage.
   (8) The individual is an eligible employee who has declined
coverage for himself or herself or his or her dependents during a
previous enrollment period because his or her dependents were covered
by another employer health benefit plan, including a plan offered
through the California Health Benefit Exchange, at the time of the
previous enrollment period. That individual may enroll himself or
herself or his or her dependents for plan coverage during a special
open enrollment opportunity if his or her dependents have lost or
will lose coverage under that other employer health benefit plan. The
special open enrollment opportunity shall be requested by the
employee not more than 30 days after the date that the other health
coverage is exhausted or terminated. Upon enrollment, coverage shall
be effective not later than the first day of the first calendar month
beginning after the date the request for enrollment is received.
Notice of the special enrollment rights contained in this paragraph
shall be provided by the employer to an employee at or before the
time the employee is offered an opportunity to enroll in plan
coverage.
   (e) "Preexisting condition provision" means a contract provision
that excludes coverage for charges or expenses incurred during a
specified period following the enrollee's effective date of coverage,
as to a condition for which medical advice, diagnosis, care, or
treatment was recommended or received during a specified period
immediately preceding the effective date of coverage. No health care
service plan shall limit or exclude coverage for any individual based
on a preexisting condition whether or not any medical advice,
diagnosis, care, or treatment was recommended or received before that
date.
   (f) "Creditable coverage" means:
   (1) Any individual or group policy, contract, or program that is
written or administered by a disability insurer, health care service
plan, fraternal benefits society, self-insured employer plan, or any
other entity, in this state or elsewhere, and that arranges or
provides medical, hospital, and surgical coverage not designed to
supplement other private or governmental plans. The term includes
continuation or conversion coverage but does not include accident
only, credit, coverage for onsite medical clinics, disability income,
Medicare supplement, long-term care, dental, vision, coverage issued
as a supplement to liability insurance, insurance arising out of a
workers' compensation or similar law, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
   (2) The Medicare Program pursuant to Title XVIII of the federal
Social Security Act (42 U.S.C. Sec. 1395 et seq.).
   (3) The Medicaid Program pursuant to Title XIX of the federal
Social Security Act (42 U.S.C. Sec. 1396 et seq.).
   (4) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
   (5) 10 U.S.C. Chapter 55 (commencing with Section 1071) (Civilian
Health and Medical Program of the Uniformed Services (CHAMPUS)).
   (6) A medical care program of the Indian Health Service or of a
tribal organization.
   (7) A health plan offered under 5 U.S.C. Chapter 89 (commencing
with Section 8901) (Federal Employees Health Benefits Program
(FEHBP)).
   (8) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)(I) of the Public Health Service Act,
as amended by Public Law 104-191, the Health Insurance Portability
and Accountability Act of 1996.
   (9) A health benefit plan under Section 5(e) of the Peace Corps
Act (22 U.S.C. Sec. 2504(e)).
   (10) Any other creditable coverage as defined by subsection (c) of
Section 2704 of Title XXVII of the federal Public Health Service Act
(42 U.S.C. Sec. 300gg-3(c)).
   (g) "Rating period" means the period for which premium rates
established by a plan are in effect and shall be no less than 12
months from the date of issuance or renewal of the health care
service plan contract.
   (h) "Risk adjusted employee risk rate" means the rate determined
for an eligible employee of a small employer in a particular risk
category after applying the risk adjustment factor.
   (i) "Risk adjustment factor" means the percentage adjustment to be
applied equally to each standard employee risk rate for a particular
small employer, based upon any expected deviations from standard
cost of services. This factor may not be more than 110 percent or
less than 90 percent.
   (j) "Risk category" means the following characteristics of an
eligible employee: age, geographic region, and family composition of
the employee, plus the health benefit plan selected by the small
employer.
   (1) No more than the following age categories may be used in
determining premium rates:
   Under 30
   30-39
   40-49
   50-54
   55-59
   60-64
   65 and over
   However, for the 65 and over age category, separate premium rates
may be specified depending upon whether coverage under the plan
contract will be primary or secondary to benefits provided by the
Medicare Program pursuant to Title XVIII of the federal Social
Security Act (42 U.S.C. Sec. 1395 et seq.).
   (2) Small employer health care service plans shall base rates to
small employers using no more than the following family size
categories:
   (A) Single.
   (B) Married couple or registered domestic partners.
   (C) One adult and child or children.
   (D) Married couple or registered domestic partners and child or
children.
   (3) (A) In determining rates for small employers, a plan that
operates statewide shall use no more than nine geographic regions in
the state, have no region smaller than an area in which the first
three digits of all its ZIP Codes are in common within a county, and
divide no county into more than two regions. Plans shall be deemed to
be operating statewide if their coverage area includes 90 percent or
more of the state's population. Geographic regions established
pursuant to this section shall, as a group, cover the entire state,
and the area encompassed in a geographic region shall be separate and
distinct from areas encompassed in other geographic regions.
Geographic regions may be noncontiguous.
   (B) (i) In determining rates for small employers, a plan that does
not operate statewide shall use no more than the number of
geographic regions in the state that is determined by the following
formula: the population, as determined in the last federal census, of
all counties that are included in their entirety in a plan's service
area divided by the total population of the state, as determined in
the last federal census, multiplied by nine. The resulting number
shall be rounded to the nearest whole integer. No region may be
smaller than an area in which the first three digits of all its ZIP
Codes are in common within a county and no county may be divided into
more than two regions. The area encompassed in a geographic region
shall be separate and distinct from areas encompassed in other
geographic regions. Geographic regions may be noncontiguous. No plan
shall have less than one geographic area.
   (ii) If the formula in clause (i) results in a plan that operates
in more than one county having only one geographic region, then the
formula in clause (i) shall not apply and the plan may have two
geographic regions, provided that no county is divided into more than
one region.
     Nothing in this section shall be construed to require a plan to
establish a new service area or to offer health coverage on a
statewide basis, outside of the plan's existing service area.
   (k) (1) "Small employer" means any of the following:
   (A) For plan years commencing on or after January 1, 2014, and on
or before December 31, 2015, any person, firm, proprietary or
nonprofit corporation, partnership, public agency, or association
that is actively engaged in business or service, that, on at least 50
percent of its working days during the preceding calendar quarter or
preceding calendar year, employed at least one, but no more than 50,
eligible employees, the majority of whom were employed within this
state, that was not formed primarily for purposes of buying health
care service plan contracts, and in which a bona fide
employer-employee relationship exists. For plan years commencing on
or after January 1, 2016, any person, firm, proprietary or nonprofit
corporation, partnership, public agency, or association that is
actively engaged in business or service, that, on at least 50 percent
of its working days during the preceding calendar quarter or
preceding calendar year, employed at least one, but no more than 100,
eligible employees, the majority of whom were employed within this
state, that was not formed primarily for purposes of buying health
care service plan contracts, and in which a bona fide
employer-employee relationship exists. In determining whether to
apply the calendar quarter or calendar year test, a health care
service plan shall use the test that ensures eligibility if only one
test would establish eligibility. In determining the number of
eligible employees, companies that are affiliated companies and that
are eligible to file a combined tax return for purposes of state
taxation shall be considered one employer. Subsequent to the issuance
of a health care service plan contract to a small employer pursuant
to this article, and for the purpose of determining eligibility, the
size of a small employer shall be determined annually. Except as
otherwise specifically provided in this article, provisions of this
article that apply to a small employer shall continue to apply until
the plan contract anniversary following the date the employer no
longer meets the requirements of this definition. It includes any
small employer as defined in this subparagraph who purchases coverage
through a guaranteed association, and any employer purchasing
coverage for employees through a guaranteed association. This
subparagraph shall be implemented to the extent consistent with
PPACA, except that the minimum requirement of one employee shall be
implemented only to the extent required by PPACA.
   (B) Any guaranteed association, as defined in subdivision (m),
that purchases health coverage for members of the association.
   (2) For plan years commencing on or after January 1, 2014, the
definition of an employer, for purposes of determining whether an
employer with one employee shall include sole proprietors, certain
owners of "S" corporations, or other individuals, shall be consistent
with Section 1304 of PPACA.
   (l) "Standard employee risk rate" means the rate applicable to an
eligible employee in a particular risk category in a small employer
group.
   (m) "Guaranteed association" means a nonprofit organization
comprised of a group of individuals or employers who associate based
solely on participation in a specified profession or industry,
accepting for membership any individual or employer meeting its
membership criteria, and that (1) includes one or more small
employers as defined in subparagraph (A) of paragraph (1) of
subdivision (k), (2) does not condition membership directly or
indirectly on the health or claims history of any person, (3) uses
membership dues solely for and in consideration of the membership and
membership benefits, except that the amount of the dues shall not
depend on whether the member applies for or purchases insurance
offered to the association, (4) is organized and maintained in good
faith for purposes unrelated to insurance, (5) has been in active
existence on January 1, 1992, and for at least five years prior to
that date, (6) has included health insurance as a membership benefit
for at least five years prior to January 1, 1992, (7) has a
constitution and bylaws, or other analogous governing documents that
provide for election of the governing board of the association by its
members, (8) offers any plan contract that is purchased to all
individual members and employer members in this state, (9) includes
any member choosing to enroll in the plan contracts offered to the
association provided that the member has agreed to make the required
premium payments, and (10) covers at least 1,000 persons with the
health care service plan with which it contracts. The requirement of
1,000 persons may be met if component chapters of a statewide
association contracting separately with the same carrier cover at
least 1,000 persons in the aggregate.
   This subdivision applies regardless of whether a contract issued
by a plan is with an association, or a trust formed for or sponsored
by an association, to administer benefits for association members.
   For purposes of this subdivision, an association formed by a
merger of two or more associations after January 1, 1992, and
otherwise meeting the criteria of this subdivision shall be deemed to
have been in active existence on January 1, 1992, if its predecessor
organizations had been in active existence on January 1, 1992, and
for at least five years prior to that date and otherwise met the
criteria of this subdivision.
   (n) "Members of a guaranteed association" means any individual or
employer meeting the association's membership criteria if that person
is a member of the association and chooses to purchase health
coverage through the association. At the association's discretion, it
also may include employees of association members, association
staff, retired members, retired employees of members, and surviving
spouses and dependents of deceased members. However, if an
association chooses to include these persons as members of the
guaranteed association, the association shall make that election in
advance of purchasing a plan contract. Health care service plans may
require an association to adhere to the membership composition it
selects for up to 12 months.
   (o) "Affiliation period" means a period that, under the terms of
the health care service plan contract, must expire before health care
services under the contract become effective.
   (p) "Grandfathered small employer health care service plan
contract" means a small employer health care service plan contract
that constitutes a grandfathered health plan.
   (q) "Grandfathered health plan" has the meaning set forth in
Section 1251 of PPACA.
   (r) "Nongrandfathered small employer health care service plan
contract" means a small employer health care service plan contract
that is not a grandfathered health plan.
   (s) "Plan year" has the meaning set forth in Section 144.103 of
Title 45 of the Code of Federal Regulations.
   (t) "PPACA" means the federal Patient Protection and Affordable
Care Act (Public Law 111-148), as amended by the federal Health Care
and Education Reconciliation Act of 2010 (Public Law 111-152), and
any rules, regulations, or guidance issued thereunder.
   (u) "Registered domestic partner" means a person who has
established a domestic partnership as described in Section 297 of the
Family Code.
   (v) "Small employer health care service plan contract" means a
health care service plan contract issued to a small employer.
   (w) "Waiting period" means a period that is required to pass with
respect to an employee before the employee is eligible to be covered
for benefits under the terms of the contract.
  SEC. 7.  Section 1357.607 of the Health and Safety Code is
repealed.
  SEC. 8.  Section 1357.607 is added to the Health and Safety Code,
to read:
   1357.607.  A small employer health care service plan contract
shall not impose a preexisting condition provision or a waiting or
affiliation period upon any individual.
  SEC. 9.  Section 1357.614 of the Health and Safety Code is amended
to read:
   1357.614.  In connection with the renewal of a grandfathered small
employer health care service plan contract, each plan shall make a
reasonable disclosure, as part of its solicitation and sales
materials, of the following:
   (a) The extent to which premium rates for a specified small
employer are established or adjusted in part based upon the actual or
expected variation in service costs of the employees and dependents
of the small employer.
   (b) The provisions concerning the plan's right to change premium
rates and the factors other than provision of services experience
that affect changes in premium rates.
   (c) Provisions relating to the guaranteed issue and renewal of
contracts.
   (d) Provisions relating to the effect of any waiting or
affiliation provision.
   (e) Provisions relating to the small employer's right to apply for
any nongrandfathered small employer health care service plan
contract written, issued, or administered by the plan at the time of
application for a new health care service plan contract, or at the
time of renewal of a health care service plan contract, consistent
with the requirements of PPACA.
   (f) The availability, upon request, of a listing of all the plan's
nongrandfathered small employer health care service plan contracts
and benefit plan designs offered, both inside and outside the
California Health Benefit Exchange, including the rates for each
contract.
   (g) At the time it renews a grandfathered small employer health
care service plan contract, each plan shall provide the small
employer with a statement of all of its nongrandfathered small
employer health care service plan contracts, including the rates for
each plan contract, in the service area in which the employer's
employees and eligible dependents who are to be covered by the plan
contract work or reside. For purposes of this subdivision, plans that
are affiliated plans or that are eligible to file a consolidated
income tax return shall be treated as one health plan.
   (h) Each plan shall do all of the following:
   (1) Prepare a brochure that summarizes all of its small employer
health care service plan contracts and to make this summary available
to any small employer and to solicitors upon request. The summary
shall include for each contract information on benefits provided, a
generic description of the manner in which services are provided,
such as how access to providers is limited, benefit limitations,
required copayments and deductibles, standard employee risk rates,
and a telephone number that can be called for more detailed benefit
information. Plans are required to keep the information contained in
the brochure accurate and up to date and, upon updating the brochure,
send copies to solicitors and solicitor firms with which the plan
contracts to solicit enrollments or subscriptions.
   (2) For each contract, prepare a more detailed evidence of
coverage and make it available to small employers, solicitors, and
solicitor firms upon request. The evidence of coverage shall contain
all information that a prudent buyer would need to be aware of in
making contract selections.
   (3) Provide to small employers and solicitors, upon request, for
any given small employer the sum of the standard employee risk rates
and the sum of the risk adjusted employee risk rates. When requesting
this information, small employers, solicitors, and solicitor firms
shall provide the plan with the information the plan needs to
determine the small employer's risk adjusted employee risk rate.
   (4) Provide copies of the current summary brochure to all
solicitors and solicitor firms contracting with the plan to solicit
enrollments or subscriptions from small employers.
   For purposes of this subdivision, plans that are affiliated plans
or that are eligible to file a consolidated income tax return shall
be treated as one health plan.
  SEC. 10.  Section 10198.7 of the Insurance Code is amended to read:

   10198.7.  (a) A health benefit plan for group coverage shall not
impose any preexisting condition provision or waivered condition
provision upon any individual.
   (b) (1) A nongrandfathered health benefit plan for individual
coverage shall not impose any preexisting condition provision or
waivered condition provision upon any individual.
   (2)  A grandfathered health benefit plan for individual coverage
shall not exclude coverage on the basis of a waivered condition
provision or preexisting condition provision for a period greater
than 12 months following the individual's effective date of coverage,
nor limit or exclude coverage for a specific insured by type of
illness, treatment, medical condition, or accident, except for
satisfaction of a preexisting condition provision or waivered
condition provision pursuant to this article. Waivered condition
provisions or preexisting condition provisions contained in
individual grandfathered health benefit plans may relate only to
conditions for which medical advice, diagnosis, care, or treatment,
including use of prescription drugs, was recommended or received from
a licensed health practitioner during the 12 months immediately
preceding the effective date of coverage.
   (3) If Section 5000A of the Internal Revenue Code, as added by
Section 1501 of PPACA, is repealed or amended to no longer apply to
the individual market, as defined in Section 2791 of the Public
Health Service Act (42 U.S.C. Sec. 300gg-91), paragraph (1) shall
become inoperative 12 months after the date of that repeal or
amendment and thereafter paragraph (2) shall apply also to
nongrandfathered health benefit plans for individual coverage.
   (4) In determining whether a preexisting condition provision or a
waivered condition provision applies to an individual under this
subdivision, a health benefit plan shall credit the time the
individual was covered under creditable coverage, provided that the
individual becomes eligible for coverage under the succeeding health
benefit plan within 62 days of termination of prior coverage and
applies for coverage under the succeeding plan within the applicable
enrollment period.
   (c) A health benefit plan for group or individual coverage shall
not impose a waiting period.
  SEC. 11.  Section 10753.05 of the Insurance Code is amended to
read:
   10753.05.  (a) No group or individual policy or contract or
certificate of group insurance or statement of group coverage
providing benefits to employees of small employers as defined in this
chapter shall be issued or delivered by a carrier subject to the
jurisdiction of the commissioner regardless of the situs of the
contract or master policyholder or of the domicile of the carrier
nor, except as otherwise provided in Sections 10270.91 and 10270.92,
shall a carrier provide coverage subject to this chapter until a copy
of the form of the policy, contract, certificate, or statement of
coverage is filed with and approved by the commissioner in accordance
with Sections 10290 and 10291, and the carrier has complied with the
requirements of Section 10753.17.
   (b) (1) On and after October 1, 2013, each carrier shall fairly
and affirmatively offer, market, and sell all of the carrier's health
benefit plans that are sold to, offered through, or sponsored by,
small employers or associations that include small employers for plan
years on or after January 1, 2014, to all small employers in each
geographic region in which the carrier makes coverage available or
provides benefits.
   (2) A carrier that offers qualified health plans through the
Exchange shall be deemed to be in compliance with paragraph (1) with
respect to health benefit plans offered through the Exchange in those
geographic regions in which the carrier offers plans through the
Exchange.
   (3) A carrier shall provide enrollment periods consistent with
PPACA and described in Section 155.725 of Title 45 of the Code of
Federal Regulations. Commencing January 1, 2014, a carrier shall
provide special enrollment periods consistent with the special
enrollment periods described in Section 10965.3, to the extent
permitted by PPACA, except for the triggering events identified in
paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the
Code of Federal Regulations with respect to health benefit plans
offered through the Exchange.
   (4) Nothing in this section shall be construed to require an
association, or a trust established and maintained by an association
to receive a master insurance policy issued by an admitted insurer
and to administer the benefits thereof solely for association
members, to offer, market, or sell a benefit plan design to those who
are not members of the association. However, if the association
markets, offers, or sells a benefit plan design to those who are not
members of the association it is subject to the requirements of this
section. This shall apply to an association that otherwise meets the
requirements of paragraph (8) formed by merger of two or more
associations after January 1, 1992, if the predecessor organizations
had been in active existence on January 1, 1992, and for at least
five years prior to that date and met the requirements of paragraph
(5).
   (5) A carrier which (A) effective January 1, 1992, and at least 20
years prior to that date, markets, offers, or sells benefit plan
designs only to all members of one association and (B) does not
market, offer, or sell any other individual, selected group, or group
policy or contract providing medical, hospital, and surgical
benefits shall not be required to market, offer, or sell to those who
are not members of the association. However, if the carrier markets,
offers, or sells any benefit plan design or any other individual,
selected group, or group policy or contract providing medical,
hospital, and surgical benefits to those who are not members of the
association it is subject to the requirements of this section.
   (6) Each carrier that sells health benefit plans to members of one
association pursuant to paragraph (5) shall submit an annual
statement to the commissioner which states that the carrier is
selling health benefit plans pursuant to paragraph (5) and which, for
the one association, lists all the information required by paragraph
(7).
   (7) Each carrier that sells health benefit plans to members of any
association shall submit an annual statement to the commissioner
which lists each association to which the carrier sells health
benefit plans, the industry or profession which is served by the
association, the association's membership criteria, a list of
officers, the state in which the association is organized, and the
site of its principal office.
   (8) For purposes of paragraphs (4) and (6), an association is a
nonprofit organization comprised of a group of individuals or
employers who associate based solely on participation in a specified
profession or industry, accepting for membership any individual or
small employer meeting its membership criteria, which do not
condition membership directly or indirectly on the health or claims
history of any person, which uses membership dues solely for and in
consideration of the membership and membership benefits, except that
the amount of the dues shall not depend on whether the member applies
for or purchases insurance offered by the association, which is
organized and maintained in good faith for purposes unrelated to
insurance, which has been in active existence on January 1, 1992, and
at least five years prior to that date, which has a constitution and
bylaws, or other analogous governing documents which provide for
election of the governing board of the association by its members,
which has contracted with one or more carriers to offer one or more
health benefit plans to all individual members and small employer
members in this state. Health coverage through an association that is
not related to employment shall be considered individual coverage
pursuant to Section 144.102(c) of Title 45 of the Code of Federal
Regulations.
   (c) On and after October 1, 2013, each carrier shall make
available to each small employer all health benefit plans that the
carrier offers or sells to small employers or to associations that
include small employers for plan years on or after January 1, 2014.
Notwithstanding subdivision (c) of Section 10753, for purposes of
this subdivision, companies that are affiliated companies or that are
eligible to file a consolidated income tax return shall be treated
as one carrier.
   (d) Each carrier shall do all of the following:
   (1) Prepare a brochure that summarizes all of its health benefit
plans and make this summary available to small employers, agents, and
brokers upon request. The summary shall include for each plan
information on benefits provided, a generic description of the manner
in which services are provided, such as how access to providers is
limited, benefit limitations, required copayments and deductibles,
and a telephone number that can be called for more detailed benefit
information. Carriers are required to keep the information contained
in the brochure accurate and up to date, and, upon updating the
brochure, send copies to agents and brokers representing the carrier.
Any entity that provides administrative services only with regard to
a health benefit plan written or issued by another carrier shall not
be required to prepare a summary brochure which includes that
benefit plan.
   (2) For each health benefit plan, prepare a more detailed evidence
of coverage and make it available to small employers, agents, and
brokers upon request. The evidence of coverage shall contain all
information that a prudent buyer would need to be aware of in making
selections of benefit plan designs. An entity that provides
administrative services only with regard to a health benefit plan
written or issued by another carrier shall not be required to prepare
an evidence of coverage for that health benefit plan.
   (3) Provide copies of the current summary brochure to all agents
or brokers who represent the carrier and, upon updating the brochure,
send copies of the updated brochure to agents and brokers
representing the carrier for the purpose of selling health benefit
plans.
   (4) Notwithstanding subdivision (c) of Section 10753, for purposes
of this subdivision, companies that are affiliated companies or that
are eligible to file a consolidated income tax return shall be
treated as one carrier.
   (e) Every agent or broker representing one or more carriers for
the purpose of selling health benefit plans to small employers shall
do all of the following:
   (1) When providing information on a health benefit plan to a small
employer but making no specific recommendations on particular
benefit plan designs:
   (A) Advise the small employer of the carrier's obligation to sell
to any small employer any of the health benefit plans it offers to
small employers, consistent with PPACA, and provide them, upon
request, with the actual rates that would be charged to that employer
for a given health benefit plan.
   (B) Notify the small employer that the agent or broker will
procure rate and benefit information for the small employer on any
health benefit plan offered by a carrier for whom the agent or broker
sells health benefit plans.
   (C) Notify the small employer that, upon request, the agent or
broker will provide the small employer with the summary brochure
required in paragraph (1) of subdivision (d) for any benefit plan
design offered by a carrier whom the agent or broker represents.
   (D) Notify the small employer of the availability of coverage and
the availability of tax credits for certain employers consistent with
PPACA and state law, including any rules, regulations, or guidance
issued in connection therewith.
   (2) When recommending a particular benefit plan design or designs,
advise the small employer that, upon request, the agent will provide
the small employer with the brochure required by paragraph (1) of
subdivision (d) containing the benefit plan design or designs being
recommended by the agent or broker.
   (3) Prior to filing an application for a small employer for a
particular health benefit plan:
   (A) For each of the health benefit plans offered by the carrier
whose health benefit plan the agent or broker is presenting, provide
the small employer with the benefit summary required in paragraph (1)
of subdivision (d) and the premium for that particular employer.
   (B) Notify the small employer that, upon request, the agent or
broker will provide the small employer with an evidence of coverage
brochure for each health benefit plan the carrier offers.
   (C) Obtain a signed statement from the small employer
acknowledging that the small employer has received the disclosures
required by this paragraph and Section 10753.16.
   (f) No carrier, agent, or broker shall induce or otherwise
encourage a small employer to separate or otherwise exclude an
eligible employee from a health benefit plan which, in the case of an
eligible employee meeting the definition in paragraph (1) of
subdivision (f) of Section 10753, is provided in connection with the
employee's employment or which, in the case of an eligible employee
as defined in paragraph (2) of subdivision (f) of Section 10753, is
provided in connection with a guaranteed association.
   (g) No carrier shall reject an application from a small employer
for a health benefit plan provided:
   (1) The small employer as defined by subparagraph (A) of paragraph
(1) of subdivision (q) of Section 10753 offers health benefits to
100 percent of its eligible employees as defined in paragraph (1) of
subdivision (f) of Section 10753. Employees who waive coverage on the
grounds that they have other group coverage shall not be counted as
eligible employees.
   (2) The small employer agrees to make the required premium
payments.
   (h) No carrier or agent or broker shall, directly or indirectly,
engage in the following activities:
   (1) Encourage or direct small employers to refrain from filing an
application for coverage with a carrier because of the health status,
claims experience, industry, occupation, or geographic location
within the carrier's approved service area of the small employer or
the small employer's employees.
   (2) Encourage or direct small employers to seek coverage from
another carrier because of the health status, claims experience,
industry, occupation, or geographic location within the carrier's
approved service area of the small employer or the small employer's
employees.
       (3) Employ marketing practices or benefit designs that will
have the effect of discouraging the enrollment of individuals with
significant health needs or discriminate based on the individual's
race, color, national origin, present or predicted disability, age,
sex, gender identity, sexual orientation, expected length of life,
degree of medical dependency, quality of life, or other health
conditions.
   This subdivision shall be enforced in the same manner as Section
790.03, including through Sections 790.035 and 790.05.
   (i) No carrier shall, directly or indirectly, enter into any
contract, agreement, or arrangement with an agent or broker that
provides for or results in the compensation paid to an agent or
broker for a health benefit plan to be varied because of the health
status, claims experience, industry, occupation, or geographic
location of the small employer or the small employer's employees.
This subdivision shall not apply with respect to a compensation
arrangement that provides compensation to an agent or broker on the
basis of percentage of premium, provided that the percentage shall
not vary because of the health status, claims experience, industry,
occupation, or geographic area of the small employer.
   (j) (1) A health benefit plan offered to a small employer, as
defined in Section 1304(b) of PPACA and in Section 10753, shall not
establish rules for eligibility, including continued eligibility, of
an individual, or dependent of an individual, to enroll under the
terms of the plan based on any of the following health status-related
factors:
   (A) Health status.
   (B) Medical condition, including physical and mental illnesses.
   (C) Claims experience.
   (D) Receipt of health care.
   (E) Medical history.
   (F) Genetic information.
   (G) Evidence of insurability, including conditions arising out of
acts of domestic violence.
   (H) Disability.
   (I) Any other health status-related factor as determined by any
federal regulations, rules, or guidance issued pursuant to Section
2705 of the federal Public Health Service Act.
   (2) Notwithstanding Section 10291.5, a carrier shall not require
an eligible employee or dependent to fill out a health assessment or
medical questionnaire prior to enrollment under a health benefit
plan. A carrier shall not acquire or request information that relates
to a health status-related factor from the applicant or his or her
dependent or any other source prior to enrollment of the individual.
   (k) (1) A carrier shall consider as a single risk pool for rating
purposes in the small employer market the claims experience of all
insureds in all nongrandfathered small employer health benefit plans
offered by the carrier in this state, whether offered as health care
service plan contracts or health insurance policies, including those
insureds and enrollees who enroll in coverage through the Exchange
and insureds and enrollees covered by the carrier outside of the
Exchange.
   (2) At least each calendar year, and no more frequently than each
calendar quarter, a carrier shall establish an index rate for the
small employer market in the state based on the total combined claims
costs for providing essential health benefits, as defined pursuant
to Section 1302 of PPACA and Section 10112.27, within the single risk
pool required under paragraph (1). The index rate shall be adjusted
on a marketwide basis based on the total expected marketwide payments
and charges under the risk adjustment and reinsurance programs
established for the state pursuant to Sections 1343 and 1341 of
PPACA. The premium rate for all of the carrier's nongrandfathered
health benefit plans shall use the applicable index rate, as adjusted
for total expected marketwide payments and charges under the risk
adjustment and reinsurance programs established for the state
pursuant to Sections 1343 and 1341 of PPACA, subject only to the
adjustments permitted under paragraph (3).
   (3) A carrier may vary premium rates for a particular
nongrandfathered health benefit plan from its index rate based only
on the following actuarially justified plan-specific factors:
   (A) The actuarial value and cost-sharing design of the health
benefit plan.
   (B) The health benefit plan's provider network, delivery system
characteristics, and utilization management practices.
   (C) The benefits provided under the health benefit plan that are
in addition to the essential health benefits, as defined pursuant to
Section 1302 of PPACA. These additional benefits shall be pooled with
similar benefits within the single risk pool required under
paragraph (1) and the claims experience from those benefits shall be
utilized to determine rate variations for health benefit plans that
offer those benefits in addition to essential health benefits.
   (D) Administrative costs, excluding any user fees required by the
Exchange.
   (E) With respect to catastrophic plans, as described in subsection
(e) of Section 1302 of PPACA, the expected impact of the specific
eligibility categories for those plans.
   (l) If a carrier enters into a contract, agreement, or other
arrangement with a third-party administrator or other entity to
provide administrative, marketing, or other services related to the
offering of health benefit plans to small employers in this state,
the third-party administrator shall be subject to this chapter.
   (m) (1) Except as provided in paragraph (2), this section shall
become inoperative if Section 2702 of the federal Public Health
Service Act (42 U.S.C. Sec. 300gg-1), as added by Section 1201 of
PPACA, is repealed, in which case, 12 months after the repeal,
carriers subject to this section shall instead be governed by Section
10705 to the extent permitted by federal law, and all references in
this chapter to this section shall instead refer to Section 10705,
except for purposes of paragraph (2).
   (2) Paragraph (3) of subdivision (b) of this section shall remain
operative as it relates to health benefit plans offered through the
Exchange.
  SEC. 11.5.  Section 10753.05 of the Insurance Code is amended to
read:
   10753.05.  (a) No group or individual policy or contract or
certificate of group insurance or statement of group coverage
providing benefits to employees of small employers as defined in this
chapter shall be issued or delivered by a carrier subject to the
jurisdiction of the commissioner regardless of the situs of the
contract or master policyholder or of the domicile of the carrier
nor, except as otherwise provided in Sections 10270.91 and 10270.92,
shall a carrier provide coverage subject to this chapter until a copy
of the form of the policy, contract, certificate, or statement of
coverage is filed with and approved by the commissioner in accordance
with Sections 10290 and 10291, and the carrier has complied with the
requirements of Section 10753.17.
   (b) (1) On and after October 1, 2013, each carrier shall fairly
and affirmatively offer, market, and sell all of the carrier's health
benefit plans that are sold to, offered through, or sponsored by,
small employers or associations that include small employers for plan
years on or after January 1, 2014, to all small employers in each
geographic region in which the carrier makes coverage available or
provides benefits.
   (2) A carrier that offers qualified health plans through the
Exchange shall be deemed to be in compliance with paragraph (1) with
respect to health benefit plans offered through the Exchange in those
geographic regions in which the carrier offers plans through the
Exchange.
   (3) A carrier shall provide enrollment periods consistent with
PPACA and described in Section 155.725 of Title 45 of the Code of
Federal Regulations. Commencing January 1, 2014, a carrier shall
provide special enrollment periods consistent with the special
enrollment periods described in Section 10965.3, to the extent
permitted by PPACA, except for the triggering events identified in
paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the
Code of Federal Regulations with respect to health benefit plans
offered through the Exchange.
   (4) Nothing in this section shall be construed to require an
association, or a trust established and maintained by an association
to receive a master insurance policy issued by an admitted insurer
and to administer the benefits thereof solely for association
members, to offer, market, or sell a benefit plan design to those who
are not members of the association. However, if the association
markets, offers, or sells a benefit plan design to those who are not
members of the association it is subject to the requirements of this
section. This shall apply to an association that otherwise meets the
requirements of paragraph (8) formed by merger of two or more
associations after January 1, 1992, if the predecessor organizations
had been in active existence on January 1, 1992, and for at least
five years prior to that date and met the requirements of paragraph
(5).
   (5) A carrier which (A) effective January 1, 1992, and at least 20
years prior to that date, markets, offers, or sells benefit plan
designs only to all members of one association and (B) does not
market, offer, or sell any other individual, selected group, or group
policy or contract providing medical, hospital, and surgical
benefits shall not be required to market, offer, or sell to those who
are not members of the association. However, if the carrier markets,
offers, or sells any benefit plan design or any other individual,
selected group, or group policy or contract providing medical,
hospital, and surgical benefits to those who are not members of the
association it is subject to the requirements of this section.
   (6) Each carrier that sells health benefit plans to members of one
association pursuant to paragraph (5) shall submit an annual
statement to the commissioner which states that the carrier is
selling health benefit plans pursuant to paragraph (5) and which, for
the one association, lists all the information required by paragraph
(7).
   (7) Each carrier that sells health benefit plans to members of any
association shall submit an annual statement to the commissioner
which lists each association to which the carrier sells health
benefit plans, the industry or profession which is served by the
association, the association's membership criteria, a list of
officers, the state in which the association is organized, and the
site of its principal office.
   (8) For purposes of paragraphs (4) and (6), an association is a
nonprofit organization comprised of a group of individuals or
employers who associate based solely on participation in a specified
profession or industry, accepting for membership any individual or
small employer meeting its membership criteria, which do not
condition membership directly or indirectly on the health or claims
history of any person, which uses membership dues solely for and in
consideration of the membership and membership benefits, except that
the amount of the dues shall not depend on whether the member applies
for or purchases insurance offered by the association, which is
organized and maintained in good faith for purposes unrelated to
insurance, which has been in active existence on January 1, 1992, and
at least five years prior to that date, which has a constitution and
bylaws, or other analogous governing documents which provide for
election of the governing board of the association by its members,
which has contracted with one or more carriers to offer one or more
health benefit plans to all individual members and small employer
members in this state. Health coverage through an association that is
not related to employment shall be considered individual coverage
pursuant to Section 144.102(c) of Title 45 of the Code of Federal
Regulations.
   (c) On and after October 1, 2013, each carrier shall make
available to each small employer all health benefit plans that the
carrier offers or sells to small employers or to associations that
include small employers for plan years on or after January 1, 2014.
Notwithstanding subdivision (c) of Section 10753, for purposes of
this subdivision, companies that are affiliated companies or that are
eligible to file a consolidated income tax return shall be treated
as one carrier.
   (d) Each carrier shall do all of the following:
   (1) Prepare a brochure that summarizes all of its health benefit
plans and make this summary available to small employers, agents, and
brokers upon request. The summary shall include for each plan
information on benefits provided, a generic description of the manner
in which services are provided, such as how access to providers is
limited, benefit limitations, required copayments and deductibles,
and a telephone number that can be called for more detailed benefit
information. Carriers are required to keep the information contained
in the brochure accurate and up to date, and, upon updating the
brochure, send copies to agents and brokers representing the carrier.
Any entity that provides administrative services only with regard to
a health benefit plan written or issued by another carrier shall not
be required to prepare a summary brochure which includes that
benefit plan.
   (2) For each health benefit plan, prepare a more detailed evidence
of coverage and make it available to small employers, agents, and
brokers upon request. The evidence of coverage shall contain all
information that a prudent buyer would need to be aware of in making
selections of benefit plan designs. An entity that provides
administrative services only with regard to a health benefit plan
written or issued by another carrier shall not be required to prepare
an evidence of coverage for that health benefit plan.
   (3) Provide copies of the current summary brochure to all agents
or brokers who represent the carrier and, upon updating the brochure,
send copies of the updated brochure to agents and brokers
representing the carrier for the purpose of selling health benefit
plans.
   (4) Notwithstanding subdivision (c) of Section 10753, for purposes
of this subdivision, companies that are affiliated companies or that
are eligible to file a consolidated income tax return shall be
treated as one carrier.
   (e) Every agent or broker representing one or more carriers for
the purpose of selling health benefit plans to small employers shall
do all of the following:
   (1) When providing information on a health benefit plan to a small
employer but making no specific recommendations on particular
benefit plan designs:
   (A) Advise the small employer of the carrier's obligation to sell
to any small employer any of the health benefit plans it offers to
small employers, consistent with PPACA, and provide them, upon
request, with the actual rates that would be charged to that employer
for a given health benefit plan.
   (B) Notify the small employer that the agent or broker will
procure rate and benefit information for the small employer on any
health benefit plan offered by a carrier for whom the agent or broker
sells health benefit plans.
   (C) Notify the small employer that, upon request, the agent or
broker will provide the small employer with the summary brochure
required in paragraph (1) of subdivision (d) for any benefit plan
design offered by a carrier whom the agent or broker represents.
   (D) Notify the small employer of the availability of coverage and
the availability of tax credits for certain employers consistent with
PPACA and state law, including any rules, regulations, or guidance
issued in connection therewith.
   (2) When recommending a particular benefit plan design or designs,
advise the small employer that, upon request, the agent will provide
the small employer with the brochure required by paragraph (1) of
subdivision (d) containing the benefit plan design or designs being
recommended by the agent or broker.
   (3) Prior to filing an application for a small employer for a
particular health benefit plan:
   (A) For each of the health benefit plans offered by the carrier
whose health benefit plan the agent or broker is presenting, provide
the small employer with the benefit summary required in paragraph (1)
of subdivision (d) and the premium for that particular employer.
   (B) Notify the small employer that, upon request, the agent or
broker will provide the small employer with an evidence of coverage
brochure for each health benefit plan the carrier offers.
   (C) Obtain a signed statement from the small employer
acknowledging that the small employer has received the disclosures
required by this paragraph and Section 10753.16.
   (f) No carrier, agent, or broker shall induce or otherwise
encourage a small employer to separate or otherwise exclude an
eligible employee from a health benefit plan which, in the case of an
eligible employee meeting the definition in paragraph (1) of
subdivision (f) of Section 10753, is provided in connection with the
employee's employment or which, in the case of an eligible employee
as defined in paragraph (2) of subdivision (f) of Section 10753, is
provided in connection with a guaranteed association.
   (g) No carrier shall reject an application from a small employer
for a health benefit plan provided:
   (1) The small employer as defined by subparagraph (A) of paragraph
(1) of subdivision (q) of Section 10753 offers health benefits to
100 percent of its eligible employees as defined in paragraph (1) of
subdivision (f) of Section 10753. Employees who waive coverage on the
grounds that they have other group coverage shall not be counted as
eligible employees.
   (2) The small employer agrees to make the required premium
payments.
   (h) No carrier or agent or broker shall, directly or indirectly,
engage in the following activities:
   (1) Encourage or direct small employers to refrain from filing an
application for coverage with a carrier because of the health status,
claims experience, industry, occupation, or geographic location
within the carrier's approved service area of the small employer or
the small employer's employees.
   (2) Encourage or direct small employers to seek coverage from
another carrier because of the health status, claims experience,
industry, occupation, or geographic location within the carrier's
approved service area of the small employer or the small employer's
employees.
   (3) Employ marketing practices or benefit designs that will have
the effect of discouraging the enrollment of individuals with
significant health needs or discriminate based on the individual's
race, color, national origin, present or predicted disability, age,
sex, gender identity, sexual orientation, expected length of life,
degree of medical dependency, quality of life, or other health
conditions.
   This subdivision shall be enforced in the same manner as Section
790.03, including through Sections 790.035 and 790.05.
   (i) No carrier shall, directly or indirectly, enter into any
contract, agreement, or arrangement with an agent or broker that
provides for or results in the compensation paid to an agent or
broker for a health benefit plan to be varied because of the health
status, claims experience, industry, occupation, or geographic
location of the small employer or the small employer's employees.
This subdivision shall not apply with respect to a compensation
arrangement that provides compensation to an agent or broker on the
basis of percentage of premium, provided that the percentage shall
not vary because of the health status, claims experience, industry,
occupation, or geographic area of the small employer.
   (j) (1) A health benefit plan offered to a small employer, as
defined in Section 1304(b) of PPACA and in Section 10753, shall not
establish rules for eligibility, including continued eligibility, of
an individual, or dependent of an individual, to enroll under the
terms of the plan based on any of the following health status-related
factors:
   (A) Health status.
   (B) Medical condition, including physical and mental illnesses.
   (C) Claims experience.
   (D) Receipt of health care.
   (E) Medical history.
   (F) Genetic information.
   (G) Evidence of insurability, including conditions arising out of
acts of domestic violence.
   (H) Disability.
   (I) Any other health status-related factor as determined by any
federal regulations, rules, or guidance issued pursuant to Section
2705 of the federal Public Health Service Act.
   (2) Notwithstanding Section 10291.5, a carrier shall not require
an eligible employee or dependent to fill out a health assessment or
medical questionnaire prior to enrollment under a health benefit
plan. A carrier shall not acquire or request information that relates
to a health status-related factor from the applicant or his or her
dependent or any other source prior to enrollment of the individual.
   (k) (1) A carrier shall consider as a single risk pool for rating
purposes in the small employer market the claims experience of all
insureds in all nongrandfathered small employer health benefit plans
offered by the carrier in this state, whether offered as health care
service plan contracts or health insurance policies, including those
insureds and enrollees who enroll in coverage through the Exchange
and insureds and enrollees covered by the carrier outside of the
Exchange.
   (2) At least each calendar year, and no more frequently than each
calendar quarter, a carrier shall establish an index rate for the
small employer market in the state based on the total combined claims
costs for providing essential health benefits, as defined pursuant
to Section 1302 of PPACA and Section 10112.27, within the single risk
pool required under paragraph (1). The index rate shall be adjusted
on a marketwide basis based on the total expected marketwide payments
and charges under the risk adjustment and reinsurance programs
established for the state pursuant to Sections 1343 and 1341 of PPACA
and Exchange user fees, as described in subdivision (d) of Section
156.80 of Title 45 of the Code of Federal Regulations. The premium
rate for all of the nongrandfathered health benefit plans within the
single risk pool required under paragraph (1) shall use the
applicable marketwide adjusted index rate, subject only to the
adjustments permitted under paragraph (3).
   (3) A carrier may vary premium rates for a particular
nongrandfathered health benefit plan from its index rate based only
on the following actuarially justified plan-specific factors:
   (A) The actuarial value and cost-sharing design of the health
benefit plan.
   (B) The health benefit plan's provider network, delivery system
characteristics, and utilization management practices.
   (C) The benefits provided under the health benefit plan that are
in addition to the essential health benefits, as defined pursuant to
Section 1302 of PPACA. These additional benefits shall be pooled with
similar benefits within the single risk pool required under
paragraph (1) and the claims experience from those benefits shall be
utilized to determine rate variations for health benefit plans that
offer those benefits in addition to essential health benefits.
   (D) Administrative costs, excluding any user fees required by the
Exchange.
   (E) With respect to catastrophic plans, as described in subsection
(e) of Section 1302 of PPACA, the expected impact of the specific
eligibility categories for those plans.
   (l) If a carrier enters into a contract, agreement, or other
arrangement with a third-party administrator or other entity to
provide administrative, marketing, or other services related to the
offering of health benefit plans to small employers in this state,
the third-party administrator shall be subject to this chapter.
   (m) (1) Except as provided in paragraph (2), this section shall
become inoperative if Section 2702 of the federal Public Health
Service Act (42 U.S.C. Sec. 300gg-1), as added by Section 1201 of
PPACA, is repealed, in which case, 12 months after the repeal,
carriers subject to this section shall instead be governed by Section
10705 to the extent permitted by federal law, and all references in
this chapter to this section shall instead refer to Section 10705,
except for purposes of paragraph (2).
   (2) Paragraph (3) of subdivision (b) of this section shall remain
operative as it relates to health benefit plans offered through the
Exchange.
  SEC. 12.  Section 10753.08 of the Insurance Code is repealed.
  SEC. 13.  Section 10753.08 is added to the Insurance Code, to read:

   10753.08.  A health benefit plan shall not impose a preexisting
condition provision or a waiting or affiliation period upon any
individual.
  SEC. 14.  Section 10755 of the Insurance Code is amended to read:
   10755.  As used in this chapter, the following definitions shall
apply:
   (a) "Agent or broker" means a person or entity licensed under
Chapter 5 (commencing with Section 1621) of Part 2 of Division 1.
   (b) "Benefit plan design" means a specific health coverage product
issued by a carrier to small employers, to trustees of associations
that include small employers, or to individuals if the coverage is
offered through employment or sponsored by an employer. It includes
services covered and the levels of copayment and deductibles, and it
may include the professional providers who are to provide those
services and the sites where those services are to be provided. A
benefit plan design may also be an integrated system for the
financing and delivery of quality health care services which has
significant incentives for the covered individuals to use the system.

   (c) "Carrier" means any disability insurance company or any other
entity that writes, issues, or administers health benefit plans that
cover the employees of small employers, regardless of the situs of
the contract or master policyholder.
   (d) "Dependent" means the spouse or registered domestic partner,
or child, of an eligible employee, subject to applicable terms of the
health benefit plan covering the employee, and includes dependents
of guaranteed association members if the association elects to
include dependents under its health coverage at the same time it
determines its membership composition pursuant to subdivision (t).
   (e) "Eligible employee" means either of the following:
   (1) Any permanent employee who is actively engaged on a full-time
basis in the conduct of the business of the small employer with a
normal workweek of an average of 30 hours per week over the course of
a month, in the small employer's regular place of business, who has
met any statutorily authorized applicable waiting period
requirements. The term includes sole proprietors or partners of a
partnership, if they are actively engaged on a full-time basis in the
small employer's business, and they are included as employees
                                        under a health benefit plan
of a small employer, but does not include employees who work on a
part-time, temporary, or substitute basis. It includes any eligible
employee, as defined in this paragraph, who obtains coverage through
a guaranteed association. Employees of employers purchasing through a
guaranteed association shall be deemed to be eligible employees if
they would otherwise meet the definition except for the number of
persons employed by the employer. A permanent employee who works at
least 20 hours but not more than 29 hours is deemed to be an eligible
employee if all four of the following apply:
   (A) The employee otherwise meets the definition of an eligible
employee except for the number of hours worked.
   (B) The employer offers the employee health coverage under a
health benefit plan.
   (C) All similarly situated individuals are offered coverage under
the health benefit plan.
   (D) The employee must have worked at least 20 hours per normal
workweek for at least 50 percent of the weeks in the previous
calendar quarter. The insurer may request any necessary information
to document the hours and time period in question, including, but not
limited to, payroll records and employee wage and tax filings.
   (2) Any member of a guaranteed association as defined in
subdivision (t).
   (f) "Enrollee" means an eligible employee or dependent who
receives health coverage through the program from a participating
carrier.
   (g) "Financially impaired" means, for the purposes of this
chapter, a carrier that, on or after the effective date of this
chapter, is not insolvent and is either:
   (1) Deemed by the commissioner to be potentially unable to fulfill
its contractual obligations.
   (2) Placed under an order of rehabilitation or conservation by a
court of competent jurisdiction.
   (h) "Health benefit plan" means a policy or contract written or
administered by a carrier that arranges or provides health care
benefits for the covered eligible employees of a small employer and
their dependents. The term does not include accident only, credit,
disability income, coverage of Medicare services pursuant to
contracts with the United States government, Medicare supplement,
long-term care insurance, dental, vision, coverage issued as a
supplement to liability insurance, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
   (i) "In force business" means an existing health benefit plan
issued by the carrier to a small employer.
   (j) "Late enrollee" means an eligible employee or dependent who
has declined health coverage under a health benefit plan offered by a
small employer at the time of the initial enrollment period provided
under the terms of the health benefit plan and who subsequently
requests enrollment in a health benefit plan of that small employer,
provided that the initial enrollment period shall be a period of at
least 30 days. It also means any member of an association that is a
guaranteed association as well as any other person eligible to
purchase through the guaranteed association when that person has
failed to purchase coverage during the initial enrollment period
provided under the terms of the guaranteed association's health
benefit plan and who subsequently requests enrollment in the plan,
provided that the initial enrollment period shall be a period of at
least 30 days. However, an eligible employee, another person eligible
for coverage through a guaranteed association pursuant to
subdivision (t), or an eligible dependent shall not be considered a
late enrollee if any of the following is applicable:
   (1) The individual meets all of the following requirements:
   (A) He or she was covered under another employer health benefit
plan, the Healthy Families Program, the Access for Infants and
Mothers (AIM) Program, the Medi-Cal program, or coverage through the
California Health Benefit Exchange at the time the individual was
eligible to enroll.
   (B) He or she certified at the time of the initial enrollment that
coverage under another employer health benefit plan, the Healthy
Families Program, the AIM Program, the Medi-Cal program, or the
California Health Benefit Exchange was the reason for declining
enrollment provided that, if the individual was covered under another
employer health plan, the individual was given the opportunity to
make the certification required by this subdivision and was notified
that failure to do so could result in later treatment as a late
enrollee.
   (C) He or she has lost or will lose coverage under another
employer health benefit plan as a result of termination of employment
of the individual or of a person through whom the individual was
covered as a dependent, change in employment status of the
individual, or of a person through whom the individual was covered as
a dependent, the termination of the other plan's coverage, cessation
of an employer's contribution toward an employee or dependent's
coverage, death of the person through whom the individual was covered
as a dependent, legal separation, or divorce; or he or she has lost
or will lose coverage under the Healthy Families Program, the AIM
Program, the Medi-Cal program, or the California Health Benefit
Exchange.
   (D) He or she requests enrollment within 30 days after termination
of coverage or employer contribution toward coverage provided under
another employer health benefit plan, or requests enrollment within
60 days after termination of Medi-Cal program coverage, AIM Program
coverage, Healthy Families Program coverage, or coverage offered
through the California Health Benefit Exchange.
   (2) The individual is employed by an employer who offers multiple
health benefit plans and the individual elects a different plan
during an open enrollment period.
   (3) A court has ordered that coverage be provided for a spouse or
minor child under a covered employee's health benefit plan.
   (4) (A) In the case of an eligible employee as defined in
paragraph (1) of subdivision (e), the carrier cannot produce a
written statement from the employer stating that the individual or
the person through whom an individual was eligible to be covered as a
dependent, prior to declining coverage, was provided with, and
signed acknowledgment of, an explicit written notice in boldface type
specifying that failure to elect coverage during the initial
enrollment period permits the carrier to impose, at the time of the
individual's later decision to elect coverage, an exclusion from
eligibility for coverage until the next open enrollment period,
unless the individual meets the criteria specified in paragraph (1),
(2), or (3). This exclusion from eligibility for coverage shall not
be considered a waiting period in violation of Section 10198.7 or
10755.08.
   (B) In the case of an eligible employee who is a guaranteed
association member, the plan cannot produce a written statement from
the guaranteed association stating that the association sent a
written notice in boldface type to all potentially eligible
association members at their last known address prior to the initial
enrollment period informing members that failure to elect coverage
during the initial enrollment period permits the plan to impose, at
the time of the member's later decision to elect coverage, an
exclusion from eligibility for coverage until the next open
enrollment period, unless the member can demonstrate that he or she
meets the requirements of subparagraphs (A), (C), and (D) of
paragraph (1) or meets the requirements of paragraph (2) or (3). This
exclusion from eligibility for coverage shall not be considered a
waiting period in violation of Section 10198.7 or 10755.08.
   (C) In the case of an employer or person who is not a member of an
association, was eligible to purchase coverage through a guaranteed
association, and did not do so, and would not be eligible to purchase
guaranteed coverage unless purchased through a guaranteed
association, the employer or person can demonstrate that he or she
meets the requirements of subparagraphs (A), (C), and (D) of
paragraph (1), or meets the requirements of paragraph (2) or (3), or
that he or she recently had a change in status that would make him or
her eligible and that application for coverage was made within 30
days of the change.
   (5) The individual is an employee or dependent who meets the
criteria described in paragraph (1) and was under a COBRA
continuation provision and the coverage under that provision has been
exhausted. For purposes of this section, the definition of "COBRA"
set forth in subdivision (e) of Section 10116.5 shall apply.
   (6) The individual is a dependent of an enrolled eligible employee
who has lost or will lose his or her coverage under the Healthy
Families Program, the AIM Program, the Medi-Cal program, or the
California Health Benefit Exchange and requests enrollment within 60
days after termination of that coverage.
   (7) The individual is an eligible employee who previously declined
coverage under an employer health benefit plan, including a plan
offered through the California Health Benefit Exchange, and who has
subsequently acquired a dependent who would be eligible for coverage
as a dependent of the employee through marriage, birth, adoption, or
placement for adoption, and who enrolls for coverage under that
employer health benefit plan on his or her behalf and on behalf of
his or her dependent within 30 days following the date of marriage,
birth, adoption, or placement for adoption, in which case the
effective date of coverage shall be the first day of the month
following the date the completed request for enrollment is received
in the case of marriage, or the date of birth, or the date of
adoption or placement for adoption, whichever applies. Notice of the
special enrollment rights contained in this paragraph shall be
provided by the employer to an employee at or before the time the
employee is offered an opportunity to enroll in plan coverage.
   (8) The individual is an eligible employee who has declined
coverage for himself or herself or his or her dependents during a
previous enrollment period because his or her dependents were covered
by another employer health benefit plan, including a plan offered
through the California Health Benefit Exchange, at the time of the
previous enrollment period. That individual may enroll himself or
herself or his or her dependents for plan coverage during a special
open enrollment opportunity if his or her dependents have lost or
will lose coverage under that other employer health benefit plan. The
special open enrollment opportunity shall be requested by the
employee not more than 30 days after the date that the other health
coverage is exhausted or terminated. Upon enrollment, coverage shall
be effective not later than the first day of the first calendar month
beginning after the date the request for enrollment is received.
Notice of the special enrollment rights contained in this paragraph
shall be provided by the employer to an employee at or before the
time the employee is offered an opportunity to enroll in plan
coverage.
   (k) "Preexisting condition provision" means a policy provision
that excludes coverage for charges or expenses incurred during a
specified period following the insured's effective date of coverage,
as to a condition for which medical advice, diagnosis, care, or
treatment was recommended or received during a specified period
immediately preceding the effective date of coverage.
   (l) "Creditable coverage" means:
   (1) Any individual or group policy, contract, or program, that is
written or administered by a disability insurer, health care service
plan, fraternal benefits society, self-insured employer plan, or any
other entity, in this state or elsewhere, and that arranges or
provides medical, hospital, and surgical coverage not designed to
supplement other private or governmental plans. The term includes
continuation or conversion coverage but does not include accident
only, credit, coverage for onsite medical clinics, disability income,
Medicare supplement, long-term care, dental, vision, coverage issued
as a supplement to liability insurance, insurance arising out of a
workers' compensation or similar law, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
   (2) The federal Medicare Program pursuant to Title XVIII of the
federal Social Security Act (42 U.S.C. Sec. 1395 et seq.).
   (3) The Medicaid Program pursuant to Title XIX of the federal
Social Security Act (42 U.S.C. Sec. 1396 et seq.).
   (4) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
   (5) 10 U.S.C. Chapter 55 (commencing with Section 1071) (Civilian
Health and Medical Program of the Uniformed Services (CHAMPUS)).
   (6) A medical care program of the Indian Health Service or of a
tribal organization.
   (7) A health plan offered under 5 U.S.C. Chapter 89 (commencing
with Section 8901) (Federal Employees Health Benefits Program
(FEHBP)).
   (8) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)(I) of the federal Public Health
Service Act, as amended by Public Law 104-191, the federal Health
Insurance Portability and Accountability Act of 1996.
   (9) A health benefit plan under Section 5(e) of the federal Peace
Corps Act (22 U.S.C. Sec. 2504(e)).
   (10) Any other creditable coverage as defined by subdivision (c)
of Section 2704 of Title XXVII of the federal Public Health Service
Act (42 U.S.C. Sec. 300gg-3(c)).
   (m) "Rating period" means the period for which premium rates
established by a carrier are in effect and shall be no less than 12
months from the date of issuance or renewal of the health benefit
plan.
   (n) "Risk adjusted employee risk rate" means the rate determined
for an eligible employee of a small employer in a particular risk
category after applying the risk adjustment factor.
   (o) "Risk adjustment factor" means the percent adjustment to be
applied equally to each standard employee risk rate for a particular
small employer, based upon any expected deviations from standard
claims. This factor may not be more than 110 percent or less than 90
percent.
   (p) "Risk category" means the following characteristics of an
eligible employee: age, geographic region, and family size of the
employee, plus the benefit plan design selected by the small
employer.
   (1) No more than the following age categories may be used in
determining premium rates:
   Under 30
   30-39
   40-49
   50-54
   55-59
   60-64
   65 and over
   However, for the 65 and over age category, separate premium rates
may be specified depending upon whether coverage under the health
benefit plan will be primary or secondary to benefits provided by the
federal Medicare Program pursuant to Title XVIII of the federal
Social Security Act.
   (2) Small employer carriers shall base rates to small employers
using no more than the following family size categories:
   (A) Single.
   (B) Married couple or registered domestic partners.
   (C) One adult and child or children.
   (D) Married couple or registered domestic partners and child or
children.
   (3) (A) In determining rates for small employers, a carrier that
operates statewide shall use no more than nine geographic regions in
the state, have no region smaller than an area in which the first
three digits of all its ZIP Codes are in common within a county, and
shall divide no county into more than two regions. Carriers shall be
deemed to be operating statewide if their coverage area includes 90
percent or more of the state's population. Geographic regions
established pursuant to this section shall, as a group, cover the
entire state, and the area encompassed in a geographic region shall
be separate and distinct from areas encompassed in other geographic
regions. Geographic regions may be noncontiguous.
   (B) In determining rates for small employers, a carrier that does
not operate statewide shall use no more than the number of geographic
regions in the state than is determined by the following formula:
the population, as determined in the last federal census, of all
counties which are included in their entirety in a carrier's service
area divided by the total population of the state, as determined in
the last federal census, multiplied by nine. The resulting number
shall be rounded to the nearest whole integer. No region may be
smaller than an area in which the first three digits of all its ZIP
Codes are in common within a county and no county may be divided into
more than two regions. The area encompassed in a geographic region
shall be separate and distinct from areas encompassed in other
geographic regions. Geographic regions may be noncontiguous. No
carrier shall have less than one geographic area.
   (q) (1) "Small employer" means either of the following:
   (A) For plan years commencing on or after January 1, 2014, and on
or before December 31, 2015, any person, firm, proprietary or
nonprofit corporation, partnership, public agency, or association
that is actively engaged in business or service, that, on at least 50
percent of its working days during the preceding calendar quarter or
preceding calendar year, employed at least one, but no more than 50,
eligible employees, the majority of whom were employed within this
state, that was not formed primarily for purposes of buying health
benefit plans, and in which a bona fide employer-employee
relationship exists. For plan years commencing on or after January 1,
2016, any person, firm, proprietary or nonprofit corporation,
partnership, public agency, or association that is actively engaged
in business or service, that, on at least 50 percent of its working
days during the preceding calendar quarter or preceding calendar
year, employed at least one, but no more than 100, eligible
employees, the majority of whom were employed within this state, that
was not formed primarily for purposes of buying health benefit
plans, and in which a bona fide employer-employee relationship
exists. In determining whether to apply the calendar quarter or
calendar year test, a carrier shall use the test that ensures
eligibility if only one test would establish eligibility. In
determining the number of eligible employees, companies that are
affiliated companies and that are eligible to file a combined tax
return for purposes of state taxation shall be considered one
employer. Subsequent to the issuance of a health benefit plan to a
small employer pursuant to this chapter, and for the purpose of
determining eligibility, the size of a small employer shall be
determined annually. Except as otherwise specifically provided in
this chapter, provisions of this chapter that apply to a small
employer shall continue to apply until the plan contract anniversary
following the date the employer no longer meets the requirements of
this definition. It includes any small employer as defined in this
subparagraph who purchases coverage through a guaranteed association,
and any employer purchasing coverage for employees through a
guaranteed association. This subparagraph shall be implemented to the
extent consistent with PPACA, except that the minimum requirement of
one employee shall be implemented only to the extent required by
PPACA.
   (B) Any guaranteed association, as defined in subdivision (s),
that purchases health coverage for members of the association.
   (2) For plan years commencing on or after January 1, 2014, the
definition of an employer, for purposes of determining whether an
employer with one employee shall include sole proprietors, certain
owners of "S" corporations, or other individuals, shall be consistent
with Section 1304 of PPACA.
   (r) "Standard employee risk rate" means the rate applicable to an
eligible employee in a particular risk category in a small employer
group.
   (s) "Guaranteed association" means a nonprofit organization
comprised of a group of individuals or employers who associate based
solely on participation in a specified profession or industry,
accepting for membership any individual or employer meeting its
membership criteria which (1) includes one or more small employers as
defined in subparagraph (A) of paragraph (1) of subdivision (q), (2)
does not condition membership directly or indirectly on the health
or claims history of any person, (3) uses membership dues solely for
and in consideration of the membership and membership benefits,
except that the amount of the dues shall not depend on whether the
member applies for or purchases insurance offered by the association,
(4) is organized and maintained in good faith for purposes unrelated
to insurance, (5) has been in active existence on January 1, 1992,
and for at least five years prior to that date, (6) has been offering
health insurance to its members for at least five years prior to
January 1, 1992, (7) has a constitution and bylaws, or other
analogous governing documents that provide for election of the
governing board of the association by its members, (8) offers any
benefit plan design that is purchased to all individual members and
employer members in this state, (9) includes any member choosing to
enroll in the benefit plan design offered to the association provided
that the member has agreed to make the required premium payments,
and (10) covers at least 1,000 persons with the carrier with which it
contracts. The requirement of 1,000 persons may be met if component
chapters of a statewide association contracting separately with the
same carrier cover at least 1,000 persons in the aggregate.
   This subdivision applies regardless of whether a master policy by
an admitted insurer is delivered directly to the association or a
trust formed for or sponsored by an association to administer
benefits for association members.
   For purposes of this subdivision, an association formed by a
merger of two or more associations after January 1, 1992, and
otherwise meeting the criteria of this subdivision shall be deemed to
have been in active existence on January 1, 1992, if its predecessor
organizations had been in active existence on January 1, 1992, and
for at least five years prior to that date and otherwise met the
criteria of this subdivision.
   (t) "Members of a guaranteed association" means any individual or
employer meeting the association's membership criteria if that person
is a member of the association and chooses to purchase health
coverage through the association. At the association's discretion, it
may also include employees of association members, association
staff, retired members, retired employees of members, and surviving
spouses and dependents of deceased members. However, if an
association chooses to include those persons as members of the
guaranteed association, the association must so elect in advance of
purchasing coverage from a plan. Health plans may require an
association to adhere to the membership composition it selects for up
to 12 months.
   (u) "Grandfathered health benefit plan" means a health benefit
plan that constitutes a grandfathered health plan.
   (v) "Grandfathered health plan" has the meaning set forth in
Section 1251 of PPACA.
   (w) "Nongrandfathered health benefit plan" means a health benefit
plan that is not a grandfathered health plan.
   (x) "Plan year" has the meaning set forth in Section 144.103 of
Title 45 of the Code of Federal Regulations.
   (y) "PPACA" means the federal Patient Protection and Affordable
Care Act (Public Law 111-148), as amended by the federal Health Care
and Education Reconciliation Act of 2010 (Public Law 111-152), and
any rules, regulations, or guidance issued thereunder.
   (z) "Waiting period" means a period that is required to pass with
respect to the employee before the employee is eligible to be covered
for benefits under the terms of the contract.
   (aa) "Registered domestic partner" means a person who has
established a domestic partnership as described in Section 297 of the
Family Code.
  SEC. 15.  Section 10755.05 of the Insurance Code is amended to
read:
   10755.05.  (a) (1) Each carrier, except a self-funded employer,
shall fairly and affirmatively renew all of the carrier's health
benefit plans that are sold to small employers or associations that
include small employers.
   (2) Nothing in this section shall be construed to require an
association, or a trust established and maintained by an association
to receive a master insurance policy issued by an admitted insurer
and to administer the benefits thereof solely for association
members, to offer, market or sell a benefit plan design to those who
are not members of the association. However, if the association
markets, offers or sells a benefit plan design to those who are not
members of the association it is subject to the requirements of this
section. This shall apply to an association that otherwise meets the
requirements of paragraph (6) formed by merger of two or more
associations after January 1, 1992, if the predecessor organizations
had been in active existence on January 1, 1992, and for at least
five years prior to that date and met the requirements of paragraph
(3).
   (3) A carrier which (A) effective January 1, 1992, and at least 20
years prior to that date, markets, offers, or sells benefit plan
designs only to all members of one association and (B) does not
market, offer or sell any other individual, selected group, or group
policy or contract providing medical, hospital and surgical benefits
shall not be required to market, offer, or sell to those who are not
members of the association. However, if the carrier markets, offers
or sells any benefit plan design or any other individual, selected
group, or group policy or contract providing medical, hospital and
surgical benefits to those who are not members of the association it
is subject to the requirements of this section.
   (4) Each carrier that sells health benefit plans to members of one
association pursuant to paragraph (3) shall submit an annual
statement to the commissioner which states that the carrier is
selling health benefit plans pursuant to paragraph (3) and which, for
the one association, lists all the information required by paragraph
(5).
   (5) Each carrier that sells health benefit plans to members of any
association shall submit an annual statement to the commissioner
which lists each association to which the carrier sells health
benefit plans, the industry or profession which is served by the
association, the association's membership
              criteria, a list of officers, the state in which the
association is organized, and the site of its principal office.
   (6) For purposes of paragraphs (2) and (3), an association is a
nonprofit organization comprised of a group of individuals or
employers who associate based solely on participation in a specified
profession or industry, accepting for membership any individual or
small employer meeting its membership criteria, which do not
condition membership directly or indirectly on the health or claims
history of any person, which uses membership dues solely for and in
consideration of the membership and membership benefits, except that
the amount of the dues shall not depend on whether the member applies
for or purchases insurance offered by the association, which is
organized and maintained in good faith for purposes unrelated to
insurance, which has been in active existence on January 1, 1992, and
at least five years prior to that date, which has a constitution and
bylaws, or other analogous governing documents which provide for
election of the governing board of the association by its members,
which has contracted with one or more carriers to offer one or more
health benefit plans to all individual members and small employer
members in this state.
   (b) Each carrier shall make available to each small employer all
nongrandfathered health benefit plans that the carrier offers or
sells to small employers or to associations that include small
employers. Notwithstanding subdivision (c) of Section 10755, for
purposes of this subdivision, companies that are affiliated companies
or that are eligible to file a consolidated income tax return shall
be treated as one carrier.
   (c) Each carrier shall do all of the following:
   (1) Prepare a brochure that summarizes all of its health benefit
plans and make this summary available to small employers, agents, and
brokers upon request. The summary shall include for each health
benefit plan information on benefits provided, a generic description
of the manner in which services are provided, such as how access to
providers is limited, benefit limitations, required copayments and
deductibles, standard employee risk rates, and a telephone number
that can be called for more detailed benefit information. Carriers
are required to keep the information contained in the brochure
accurate and up to date, and, upon updating the brochure, send copies
to agents and brokers representing the carrier. Any entity that
provides administrative services only with regard to a benefit plan
design written or issued by another carrier shall not be required to
prepare a summary brochure which includes that benefit plan design.
   (2) For each health benefit plan, prepare a more detailed evidence
of coverage and make it available to small employers, agents and
brokers upon request. The evidence of coverage shall contain all
information that a prudent buyer would need to be aware of in making
selections of benefit plan designs. An entity that provides
administrative services only with regard to a benefit plan design
written or issued by another carrier shall not be required to prepare
an evidence of coverage for that benefit plan design.
   (3) Provide to small employers and agents and brokers, upon
request, for any given small employer the sum of the standard
employee risk rates and the sum of the risk adjusted employee risk
rates. When requesting this information, small employers and agents
and brokers shall provide the plan with the information the plan
needs to determine the small employer's risk adjusted employee risk
rate.
   (4) Provide copies of the current summary brochure to all agents
or brokers who represent the carrier and, upon updating the brochure,
send copies of the updated brochure to agents and brokers
representing the carrier for the purpose of selling health benefit
plans.
   (5) Notwithstanding subdivision (c) of Section 10755, for purposes
of this subdivision, companies that are affiliated companies or that
are eligible to file a consolidated income tax return shall be
treated as one carrier.
   (d) No carrier, agent, or broker shall induce or otherwise
encourage a small employer to separate or otherwise exclude an
eligible employee from a health benefit plan which, in the case of an
eligible employee meeting the definition in paragraph (1) of
subdivision (e) of Section 10755, is provided in connection with the
employee's employment or which, in the case of an eligible employee
as defined in paragraph (2) of subdivision (e) of Section 10755, is
provided in connection with a guaranteed association.
   (e) No carrier or agent or broker shall, directly or indirectly,
engage in the following activities:
   (1) Encourage or direct small employers to refrain from filing an
application for coverage with a carrier because of the health status,
claims experience, industry, occupation, or geographic location
within the carrier's approved service area of the small employer or
the small employer's employees.
   (2) Encourage or direct small employers to seek coverage from
another carrier or the California Health Benefit Exchange because of
the health status, claims experience, industry, occupation, or
geographic location within the carrier's approved service area of the
small employer or the small employer's employees.
   (f) No carrier shall, directly or indirectly, enter into any
contract, agreement, or arrangement with an agent or broker that
provides for or results in the compensation paid to an agent or
broker for a health benefit plan to be varied because of the health
status, claims experience, industry, occupation, or geographic
location of the small employer or the small employer's employees.
This subdivision shall not apply with respect to a compensation
arrangement that provides compensation to an agent or broker on the
basis of percentage of premium, provided that the percentage shall
not vary because of the health status, claims experience, industry,
occupation, or geographic area of the small employer.
   (g) A policy or contract that covers a small employer, as defined
in Section 1304(b) of PPACA and in subdivision (q) of Section 10755
shall not establish rules for eligibility, including continued
eligibility, of an individual, or dependent of an individual, to
enroll under the terms of the plan based on any of the following
health status-related factors:
   (1) Health status.
   (2) Medical condition, including physical and mental illnesses.
   (3) Claims experience.
   (4) Receipt of health care.
   (5) Medical history.
   (6) Genetic information.
   (7) Evidence of insurability, including conditions arising out of
acts of domestic violence.
   (8) Disability.
   (9) Any other health status-related factor as determined by any
federal regulations, rules, or guidance issued pursuant to Section
2705 of the federal Public Health Service Act.
   (h) If a carrier enters into a contract, agreement, or other
arrangement with a third-party administrator or other entity to
provide administrative, marketing, or other services related to the
offering of health benefit plans to small employers in this state,
the third-party administrator shall be subject to this chapter.
  SEC. 16.  Section 10755.08 of the Insurance Code is repealed.
  SEC. 17.  Section 10755.08 is added to the Insurance Code, to read:

   10755.08.  A health benefit plan shall not impose a preexisting
condition provision or a waiting or affiliation period upon any
individual.
  SEC. 18.  Section 11.5 of this bill incorporates amendments to
Section 10753.05 of the Insurance Code proposed by both this bill and
SB 959. It shall only become operative if (1) both bills are enacted
and become effective on or before January 1, 2015, (2) each bill
amends Section 10753.05 of the Insurance Code, and (3) this bill is
enacted after SB 959, in which case Section 11 of this bill shall not
become operative.
  SEC. 19.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.