Amended in Senate September 4, 2015

Amended in Senate June 25, 2015

Amended in Assembly May 5, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 1305

Introduced by Assembly Member Bonta

February 27, 2015

An act to amend Sections 1367.006 and 1367.007 of the Health and Safety Code, and to amend Sections 10112.28 and 10112.29 of the Insurance Code, relating to health care coverage.

LEGISLATIVE COUNSEL’S DIGEST

AB 1305, as amended, Bonta. Limitations on cost sharing: family coverage.

Existing federal law, the federal Patient Protection and Affordable Care Act (PPACA), enacts various health care coverage market reforms that take effect January 1, 2014. Among other things, PPACA establishes annual limits on specified forms of cost sharing, including deductibles, on all essential health benefits for nongrandfathered individual and group health insurance coverage.

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 requires, for nongrandfathered products in the individual or small group markets, a health care service plan contract or health insurance policy, except a specialized health care service plan or health insurance policy, that is issued, amended, or renewed on or after January 1, 2015, to provide for a limit on annual out-of-pocket expenses for all covered benefits that meet the definition of essential health benefits, and requires the plan contract or policy, for nongrandfathered products in the large group market, to provide that limit for covered benefits to the extent that the limit does not conflict with federal law or guidance, as specified. Existing law prohibits this limit from exceeding the limit described in a specified provision of federal law.

This bill would require, for family coverage, begin delete the above-described limit on annual out-of-pocket expenses to include a maximum out-of-pocket limit for each individual covered by the plan contract or policy that is less than or equal to the maximum out-of-pocket limit end delete begin insert that an individual within a family shall not have a maximum out-of-pocket limit that is greater than the maximum out-of-pocket limit end insert for individual coverage begin delete under the plan contract or policy. end delete begin insert for that product. end insert The bill would require a plan contract or policy and, commencing begin delete July 1, 2016, end delete begin insert January 1, 2017, end insert a large group market plan contract or policy, for family coverage that includes a deductible, except a high deductible health plan, begin delete to include a deductible for each individual covered under the plan contract or policy that is less than or equal to the deductible end delete begin insert that an individual within a family shall not have a deductible that is greater than the deductible limit end insert for individual coverage begin delete under the plan contract or policy. end delete begin insert for that product. end insert The bill would require a plan contract or policy and, commencing begin delete July 1, 2016, end delete begin insert January 1, 2017, end insert a large group market health plan contract or policy, for family coverage that includes a deductible and is a high deductible health plan, as defined in federal law, to include a deductible for each individual covered by the plan contract or policy that is equal to either the amount set forth in a specified provision of federal law or the deductible for individual coverage under the plan contract or policy, whichever is greater. Because a willful violation of these requirements by a health care service plan would be a crime, this bill would impose a state-mandated local program.

begin insert

Existing law prohibits the deductible under a small employer health care service plan contract or small employer health insurance policy that is offered, sold, or renewed on or after January 1, 2014, from exceeding specified dollar amounts. Existing law requires those dollar amounts to be indexed consistent with specified provisions of the PPACA and any federal rules or guidance pursuant to those provisions.

end insert begin insert

This bill would instead require those dollar amounts to be indexed consistent with provisions of the PPACA that specify a formula for calculating health plan premium adjustment percentages. Because a willful violation of this requirement by a health care service plan would be a crime, this bill would impose a state-mandated local program.

end insert

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

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

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

SECTION 1.  

Section 1367.006 of the Health and Safety Code
is amended to read:

1367.006.  

(a) This section shall apply to nongrandfathered
individual and group health care service plan contracts that provide
coverage for essential health benefits, as defined in Section
1367.005, and that are issued, amended, or renewed on or after
January 1, 2015.

(b) (1) For nongrandfathered health care service plan contracts
in the individual or small group markets, a health care service plan
contract, except a specialized health care service plan contract,
that is issued, amended, or renewed on or after January 1, 2015,
shall provide for a limit on annual out-of-pocket expenses for all
covered benefits that meet the definition of essential health benefits
in Section 1367.005, including out-of-network emergency care
consistent with Section 1371.4.

(2) For nongrandfathered health care service plan contracts in
the large group market, a health care service plan contract, except
a specialized health care service plan contract, that is issued,
amended, or renewed on or after January 1, 2015, shall provide
for a limit on annual out-of-pocket expenses for covered benefits,
including out-of-network emergency care consistent with Section
1371.4. This limit shall only apply to essential health benefits, as
defined in Section 1367.005, that are covered under the plan to
the extent that this provision does not conflict with federal law or
guidance on out-of-pocket maximums for nongrandfathered health
care service plan contracts in the large group market.

(c) (1) The limit described in subdivision (b) shall not exceed
the limit described in Section 1302(c) of PPACA, and any
subsequent rules, regulations, or guidance issued under that section.

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

(3) For family coverage, begin delete the limit described in subdivision (b)
shall include a maximum out-of-pocket limit for each individual
covered by the plan that is less than or equal to the maximum
out-of-pocket limit end delete begin insert an individual within a family shall not have a
maximum out-of-pocket limit that is greater than the maximum
out-of-pocket limit end insert for individual coverage begin delete under the plan contract. end delete
begin insert for that product. end insert

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

(e) If an essential health benefit is offered or provided by a
specialized health care service plan, the total annual out-of-pocket
maximum for all covered essential benefits shall not exceed the
limit in subdivision (b). This section shall not apply to a specialized
health care service plan that does not offer an essential health
benefit as defined in Section 1367.005.

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

(g) (1) (A) Except as provided in paragraph (2), if a health care
service plan contract for family coverage includes a deductible,
begin delete the plan contract shall include a deductible for each individual
covered by the plan that is less than or equal to the deductible end delete begin insert an
individual within a family shall not have a deductible that is greater
than the deductible limit end insert for individual coverage begin delete under the plan
contract. end delete begin insert for that product. end insert

(B) Except as provided in paragraph (2), if a large group market
health care service plan contract for family coverage that is issued,
amended, or renewed on or after begin delete July 1, 2016, end delete begin insert January 1, 2017, end insert
includes a deductible, begin delete the plan contract shall include a deductible
for each individual covered by the plan that is less than or equal
to the deductible end delete begin insert an individual within a family shall not have a
deductible that is more than the deductible limit end insert for individual
coverage begin delete under the plan contract. end delete begin insert for that product. end insert

(2) (A) If a health care service plan contract for family coverage
includes a deductible and is a high deductible health plan under
the definition set forth in Section 223(c)(2) of Title 26 of the United
States Code, the plan contract shall include a deductible for each
individual covered by the plan that is equal to either the amount
set forth in Section 223(c)(2)(A)(i)(II) of Title 26 of the United
States Code or the deductible for individual coverage under the
plan contract, whichever is greater.

(B) If a large group market health care service plan contract for
family coverage that is issued, amended, or renewed on or after
begin delete July 1, 2016, end delete begin insert January 1, 2017, end insert includes a deductible and is a high
deductible health plan under the definition set forth in Section
223(c)(2) of Title 26 of the United States Code, the plan contract
shall include a deductible for each individual covered by the plan
that is equal to either the amount set forth in Section
223(c)(2)(A)(i)(II) of Title 26 of the United States Code or the
deductible for individual coverage under the plan contract,
whichever is greater.

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

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

SEC. 2.  

Section 1367.007 of the Health and Safety Code is
amended to read:

1367.007.  

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

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

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

(2) The dollar amounts in this section shall be indexed consistent
with Section begin delete 1302(c)(1) end delete begin insert 1302(c)(4) end insert of PPACA and any federal
rules or guidance pursuant to that section.

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

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

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

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

SEC. 3.  

Section 10112.28 of the Insurance Code is amended
to read:

10112.28.  

(a) This section shall apply to nongrandfathered
individual and group health insurance policies that provide
coverage for essential health benefits, as defined in Section
10112.27, and that are issued, amended, or renewed on or after
January 1, 2015.

(b) (1) For nongrandfathered health insurance policies in the
individual or small group markets, a health insurance policy, except
a specialized health insurance policy, that is issued, amended, or
renewed on or after January 1, 2015, shall provide for a limit on
annual out-of-pocket expenses for all covered benefits that meet
the definition of essential health benefits in Section 10112.27,
including out-of-network emergency care.

(2) For nongrandfathered health insurance policies in the large
group market, a health insurance policy, except a specialized health
insurance policy, that is issued, amended, or renewed on or after
January 1, 2015, shall provide for a limit on annual out-of-pocket
expenses for covered benefits, including out-of-network emergency
care. This limit shall apply only to essential health benefits, as
defined in Section 10112.27, that are covered under the policy to
the extent that this provision does not conflict with federal law or
guidance on out-of-pocket maximums for nongrandfathered health
insurance policies in the large group market.

(c) (1) The limit described in subdivision (b) shall not exceed
the limit described in Section 1302(c) of PPACA and any
subsequent rules, regulations, or guidance issued under that section.

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

(3) For family coverage, begin delete the limit described in subdivision (b)
shall include a maximum out-of-pocket limit for each individual
covered by the policy that is less than or equal to the maximum
out-of-pocket limit end delete begin insert an individual within a family shall not have a
maximum out-of-pocket limit that is greater than the maximum
out-of-pocket limit end insert for individual coverage begin delete under the policy. end delete begin insert for
that product. end insert

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

(e) If an essential health benefit is offered or provided by a
specialized health insurance policy, the total annual out-of-pocket
maximum for all covered essential benefits shall not exceed the
limit in subdivision (b). This section shall not apply to a specialized
health insurance policy that does not offer an essential health
benefit as defined in Section 10112.27.

(f) The maximum out-of-pocket limit shall apply to any
copayment, coinsurance, deductible, and any other form of cost
sharing for all covered benefits that meet the definition of essential
health benefits, as defined in Section 10112.27.

(g) (1) (A) Except as provided in paragraph (2), if a health
insurance policy for family coverage includes a deductible, begin delete the
policy shall include a deductible for each individual covered under
the policy that is less than or equal to the deductible end delete begin insert an individual
within a family shall not have a deductible that is greater than the
deductible limit end insert for individual coverage begin delete under the policy. end delete begin insert for that
product. end insert

(B) Except as provided in paragraph (2), begin delete if end delete begin insert for end insert a large group
market health insurance policy for family coverage that is issued,
amended, or renewed on or after begin delete July 1, 2016, end delete begin insert January 1, 2017, end insert
includes a deductible, begin delete the policy shall include a deductible for each
individual covered under the policy that is less than or equal to the
deductible end delete begin insert an individual within a family shall not have a deductible
that is greater than the deductible limit end insert for individual coverage
begin delete under the policy. end delete begin insert for that product. end insert

(2) (A) If a health insurance policy for family coverage includes
a deductible and is a high deductible health plan under the
definition set forth in Section 223(c)(2) of Title 26 of the United
States Code, the policy shall include a deductible for each
individual covered by the policy that is equal to either the amount
set forth in Section 223(c)(2)(A)(i)(II) of Title 26 of the United
States Code or the deductible for individual coverage under the
policy, whichever is greater.

(B) If a large group market health insurance policy for family
coverage that is issued, amended, or renewed on or after begin delete July 1,
2016, end delete begin insert January 1, 2017, end insert includes a deductible and is a high
deductible health plan under the definition set forth in Section
223(c)(2) of Title 26 of the United States Code, the policy shall
include a deductible for each individual covered by the policy that
is equal to either the amount set forth in Section 223(c)(2)(A)(i)(II)
of Title 26 of the United States Code or the deductible for
individual coverage under the policy, whichever is greater.

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

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

SEC. 4.  

Section 10112.29 of the Insurance Code is amended
to read:

10112.29.  

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

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

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

(2) The dollar amounts in this section shall be indexed consistent
with Section begin delete 1302(c)(1) end delete begin insert 1302(c)(4) end insert of PPACA and any federal
rules or guidance pursuant to that section.

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

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

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

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

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

SEC. 5.  

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.