Amended in Senate May 27, 2014

Amended in Senate May 12, 2014

Amended in Senate April 28, 2014

Amended in Senate March 25, 2014

Senate Bill No. 1446

Introduced by Senator DeSaulnier

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(Coauthor: Senator Anderson)

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February 21, 2014

An act to add Section 1367.012 to the Health and Safety Code, and to add Section 10112.300 to the Insurance Code, relating to health care coverage, and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

SB 1446, as amended, DeSaulnier. Health care coverage: small employer market.

Existing federal 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 requires each health insurance issuer that offers health insurance coverage in the individual or group market in a state to accept every employer and individual in the state that applies for that coverage and to renew that coverage at the option of the plan sponsor or the individual. PPACA prohibits a group health plan and a health insurance issuer offering group or individual health insurance coverage from imposing any preexisting condition exclusion with respect to that plan or coverage. PPACA allows the premium rate charged by a health insurance issuer offering small group or individual coverage to vary only by rating area, age, tobacco use, and whether the coverage is for an individual or family and prohibits discrimination against individuals based on health status. PPACA requires a health insurance issuer that offers coverage in the small group or individual market to ensure that the coverage includes the essential health benefits package, as defined. However, guidance issued under PPACA grants transitional relief to health insurance coverage in the individual or small group market for policies in effect on October 1, 2013, that are renewed for a policy year starting between January 1, 2014, and October 1, 2016, and exempts that coverage from certain PPACA reforms, as specified.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act), provides for the licensure and regulation of health care service plans by the Department of Managed Health Care. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law implements the PPACA reforms described above under the Knox-Keene Act and the laws governing health insurance.

This bill would allow a small employer health care service plan contract or a small employer health insurance policy that was in effect on begin delete October 1, end delete begin insert December 31, end insert 2013, that is still in effect as of the effective date of this act, and that does not qualify as a grandfathered health plan under PPACA, to be renewed until January 1, 2015, and to continue to be in force until December 31, 2015. The bill would exempt those health care service plan contracts and health insurance policies from various provisions of state law that implement the PPACA reforms described above and would require that the contracts and policies be amended to comply with those provisions by January 1, 2016, in order to remain in force on and after that date. The bill would require that these provisions be implemented only to the extent permitted by PPACA.

This bill would declare that it is to take effect immediately as an urgency statute.

Vote: ²⁄₃. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

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

SECTION 1.  

Section 1367.012 is added to the Health and
Safety Code, to read:

1367.012.  

(a) (1) A small employer health care service plan
contract in effect on begin delete October 1, 2013, including those renewed by end delete
December 31, 2013, and still in effect as of the effective date of
this section, that does not qualify as a grandfathered health plan
under Section 1251 of PPACA may be renewed until January 1,
2015, and may continue to be in force until December 31, 2015,
subject to applicable federal law, and any other requirements
imposed by this chapter.

(2) A small employer health care service plan contract described
in paragraph (1) may continue to be in force after December 31,
2015, if the contract is amended to comply with all of the
provisions listed in subdivision (e) by January 1, 2016, and
complies with all other applicable provisions of law.

(b) (1)  begin delete Prior to renewing end delete begin insert If a health care service plan offers
for renewal end insert a small employer health care service plan contract
pursuant to paragraph (1) of subdivision (a), the health care service
plan shall provide notice to the group contractholder regarding the
option to renew coverage pursuant to subdivision (a) using the
relevant notice attached to the guidance entitled “Insurance
Standards Bulletin Series - Extension of Transition Policy through
October 1, 2016,” issued by the United States Department of Health
and Human Services, Centers for Medicare and Medicaid Services
on March 5, 2014.

(2) A health care service plan shall include the following notice
with the notice issued pursuant to paragraph (1):

“New health care coverage options are available in California.
You currently have health care coverage that is not required to
comply with many new laws. begin delete For example, your current plan might
not include coverage for some of the benefits that must be covered
in the new health care products. end delete begin insert A new health care service plan
contract may be more affordable and/or offer more comprehensive
benefits. New plans may also have limits on deductibles and
out-of-pocket costs, while your existing plan may have no such
limits. end insert

You have the option to remain with your current coverage for
one more year or switch to new coverage that complies with the
new laws. begin insert Covered California, the state’s new health insurance
market end insert begin insert place, offers small employers health insurance from a
number of companies through its Small Business Health Options
Program (SHOP). Federal tax credits are available through the
SHOP to those small employers that qualify. end insert Talk to Covered
California begin delete (1-800-300-1506), end delete begin insert (1-877-453-9198), end insert your plan
representative, or your insurance agent to discuss begin insert your end insert options.”

(3) A health care service plan shall include with the notices
issued pursuant to paragraphs (1) and (2), the premium, cost
sharing, and benefits associated with the plan’s standard benefit
designs approved consistent with subdivision (c) of Section 100504
of the Government Code for the geographic region of the small
employer.

begin insert

(4) A health care service plan that offers for renewal a small
employer health care service plan contract pursuant to paragraph
(1) of subdivision (a) shall offer renewal to all employers whose
health care service plan contract with that health care service plan
was in effect on December 31, 2013.

end insert

(c)  begin insert (1) end insert begin insert   end insert A small employer health care service plan contract in
effect on begin delete October 1, 2013, including those renewed by end delete December
31, 2013, and still in effect as of the effective date of this section,
that does not qualify as a grandfathered health plan under Section
1251 of PPACA that is renewed on or before January 1, 2015, and
that continues to be in force until no later than December 31, 2015,
is exempt from the following provisions:

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(1)

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begin insert (A) end insert  Paragraphs (1) and (2) of subdivision (a) of, and subdivisions
(e) and (i) of, Section 1357.503.

begin delete

(2)

end delete

begin insert (B) end insert  Section 1357.512.

begin delete

(3)

end delete

begin insert (C) end insert  Sections 1367.005 and 1357.508.

begin delete

(4)

end delete

begin insert (D) end insert  Section 1367.0065.

begin delete

(5)

end delete

begin insert (E) end insert  Section 1367.006.

begin delete

(6)

end delete

begin insert (F) end insert  Section 1367.007.

begin delete

(7)

end delete

begin insert (G) end insert  Section 1367.009.

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(2) Notwithstanding paragraphs (1) and (2) of subdivision (a)
of, and subdivision (e) of, Section 1357.503, a small employer
health care service plan contract subject to this section shall only
be offered, marketed, and sold to an employer whose health care
service plan contract with that health care service plan was in
effect on December 31, 2013.

end insert

(d) A small employer health care service plan contract described
in paragraph (1) of subdivision (a) shall be subject to Sections
1357.12 and 1357.13, and shall continue to be subject to Article
3.16 (commencing with Section 1357.500), except as provided in
subdivision (c), and to all otherwise applicable provisions of this
chapter.

(e) No later than January 1, 2016, a small employer health care
service plan contract described in paragraph (1) of subdivision (a)
may be amended to comply with all of the following:

(1) Paragraphs (1) and (2) of subdivision (a) of, and subdivisions
(e) and (i) of, Section 1357.503.

(2) Section 1357.512.

(3) Sections 1357.508 and 1367.005.

(4) Section 1367.006.

(5) Section 1367.007.

(6) Section 1367.009.

(f) This section shall be implemented only to the extent
permitted by PPACA.

(g) For purposes of this section, the following definitions shall
apply:

(1) “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 pursuant to that law.

(2) “Small employer health care service plan contract” means
a group health care service plan contract, other than a specialized
health care service plan contract, issued to a small employer, as
defined in subdivision (s) of Section 1357.500.

SEC. 2.  

Section 10112.300 is added to the Insurance Code, to
read:

10112.300.  

(a) (1) A small employer health benefit plan in
effect on begin delete October 1, 2013, including those renewed by end delete December
31, 2013, and still in effect as of the effective date of this section,
that does not qualify as a grandfathered health plan under Section
1251 of PPACA may be renewed until January 1, 2015, and may
continue to be in force until December 31, 2015, subject to
applicable federal law, and any other requirements imposed by
this part.

(2) A small employer health benefit plan described in paragraph
(1) may continue to be in force after December 31, 2015, if the
plan is amended to comply with all of the provisions listed in
subdivision (e) by January 1, 2016, and complies with all other
applicable provisions of law.

(b) (1)  begin delete Prior to renewing end delete begin insert If an insurer offers for renewal end insert a small
employer health benefit plan pursuant to paragraph (1) of
subdivision (a), the insurer shall provide notice to the group
contractholder regarding the option to renew coverage pursuant
to subdivision (a) using the relevant notice attached to the guidance
entitled “Insurance Standards Bulletin Series - Extension of
Transition Policy through October 1, 2016,” issued by the United
States Department of Health and Human Services, Centers for
Medicare and Medicaid Services on March 5, 2014.

(2) An insurer shall include the following notice with the notice
issued pursuant to paragraph (1):

“New health care coverage options are available in California.
You currently have health care coverage that is not required to
comply with many new laws. begin delete For example, your current insurance
might not include coverage for some of the benefits that must be
covered in the new health care products. end delete begin insert A new health benefit plan
may be more affordable and/or offer more comprehensive benefits.
New plans may also have limits on deductibles and out-of-pocket
costs, while your existing plan may have no such limits. end insert

You have the option to remain with your current coverage for
one more year or switch to new coverage that complies with the
new laws. begin insert Covered California, the state’s new health insurance
market end insert begin insert place, offers small employers health insurance from a
number of companies through its Small Business Health Options
Program (SHOP). Federal tax credits are available through the
SHOP to those small employers that qualify. end insert Talk to Covered
California begin delete (1-800-300-1506), end delete begin insert (1-877-453-9198), end insert your plan
representative, or your insurance agent to discuss begin insert your end insert options.”

(3) An insurer shall include with the notices issued pursuant to
paragraphs (1) and (2), the premium, cost sharing, and benefits
associated with the plan’s standard benefit designs approved
consistent with subdivision (c) of Section 100504 of the
Government Code for the geographic region of the small employer.

begin insert

(4) An insurer that offers for renewal a small employer health
benefit plan pursuant to paragraph (1) of subdivision (a) shall
offer renewal to all employers whose health benefit plan with that
insurer was in effect on December 31, 2013.

end insert

(c)  begin insert (1) end insert begin insert   end insert A small employer health benefit plan in effect on begin delete October
1, 2013, including those renewed by end delete December 31, 2013, and still
in effect as of the effective date of this section, that does not qualify
as a grandfathered health plan under Section 1251 of PPACA that
is renewed on or before January 1, 2015, and that continues to be
in force until no later than December 31, 2015, is exempt from the
following provisions:

begin delete

(1)

end delete

begin insert (A) end insert  Paragraph (1) of subdivision (b) of, and subdivisions (c),
(g), and (k) of, Section 10753.05.

begin delete

(2)

end delete

begin insert (B) end insert  Section 10753.14.

begin delete

(3)

end delete

begin insert (C) end insert  Section 10112.27.

begin delete

(4)

end delete

begin insert (D) end insert  Section 10112.285.

begin delete

(5)

end delete

begin insert (E) end insert  Section 10112.28.

begin delete

(6)

end delete

begin insert (F) end insert  Section 10112.29.

begin delete

(7)

end delete

begin insert (G) end insert  Section 10112.297.

begin insert

(2) Notwithstanding paragraph (1) of subdivision (b) of, and
subdivision (g) of, Section 10753.05, a small employer health
benefit plan subject to this section shall only be offered, marketed,
and sold to an employer whose health benefit plan with that insurer
was in effect on December 31, 2013.

end insert

(d) A small employer health benefit plan described in paragraph
(1) of subdivision (a) shall be subject to Sections 10714 and 10715,
and shall continue to be subject to Chapter 8.01 (commencing with
Section 10753), except as provided in subdivision (c), and to all
otherwise applicable provisions of this part.

(e) No later than January 1, 2016, a small employer health
benefit plan described in paragraph (1) of subdivision (a) may be
amended to comply with all of the following:

(1) Paragraph (1) of subdivision (b) of, and subdivisions (c),
(g), and (k) of, Section 10753.05.

(2) Section 10753.14.

(3) Section 10112.27.

(4) Section 10112.28.

(5) Section 10112.29.

(6) Section 10112.297.

(f) This section shall be implemented only to the extent
permitted by PPACA.

(g) For purposes of this section, the following definitions shall
apply:

(1) “Health benefit plan” has the same meaning as defined in
subdivision (j) of Section 10753.

(2) “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 pursuant to that law.

(3) “Small employer health benefit plan” means a group health
benefit plan issued to a small employer, as defined in Section
10753.

SEC. 3.  

This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:

In order to carry out the extended transitional policy under the
federal Patient Protection and Affordable Care Act (Public Law
111-148) announced by the United States Department of Health
and Human Services, Centers for Medicare and Medicaid Services
on March 5, 2014, and to allow small businesses to reenroll in
their current health care coverage until 2016, it is necessary that
this act take effect immediately.