Amended in Assembly August 17, 2015

Amended in Assembly July 16, 2015

Amended in Senate April 20, 2015

Senate Bill No. 43

Introduced by Senator Hernandez

(Coauthor: Senator Monning)

December 5, 2014

An act to amend, repeal, and add Section 1367.005 of the Health and Safety Code, and to amend, repeal, and add Section 10112.27 of the Insurance Code, relating to health care coverage.

LEGISLATIVE COUNSEL’S DIGEST

SB 43, as amended, Hernandez. Health care coverage: essential health benefits.

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 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. PPACA requires each state, by January 1, 2014, to establish an American Health Benefit Exchange that facilitates the purchase of qualified health plans by qualified individuals and qualified small employers. PPACA defines a qualified health plan as a plan that, among other requirements, provides an essential health benefits package. Existing state law creates the California Health Benefit Exchange (the Exchange) to facilitate the purchase of qualified health plans by qualified individuals and qualified small employers.

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 provides for the regulation of health insurers by the Department of Insurance. Existing law requires an individual or small group health care service plan contract or individual or small group health insurance policy issued, amended, or renewed on or after January 1, 2014, to cover essential health benefits, defined to include rehabilitative and habilitative services and the health benefits covered by particular benchmark plans, including a certain plan offered during the first quarter of 2012. Existing law requires habilitative services to be covered under the same terms and conditions applied to rehabilitative services under the plan contract or policy, and defines habilitative services to mean medically necessary health care services and health care devices that assist an individual in partially or fully acquiring or improving skills and functions and that are necessary to address a health condition. Existing law specifies that these provisions do not apply to specified plans, including grandfathered plans. Existing law authorizes the Department of Managed Health Care and the Department of Insurance to adopt emergency regulations implementing these provisions until March 1, 2016.

This bill would, for an individual or small group health care service plan contract or an individual or small group health insurance policy issued, amended, or renewed on or after January 1, 2017, prohibit limits on habilitative and rehabilitative services from being begin delete combined, revise the definition of “habilitative services” to conform to federal regulations, end delete begin insert combined end insert and would define essential health benefits to include the health benefits covered by particular benchmark plans as of the first quarter of 2014, as specified. begin insert The bill, for plan years commencing on or after January 1, 2016, would revise end insert begin insert the definition of “habilitative services” to conform to federal regulations. end insert The bill would authorize the Department of Managed Health Care and the Department of Insurance to adopt emergency regulations implementing amendments made to the above-described provisions during the 2015-16 Regular Session begin insert of the Legislature end insert until July 1, 2018.

Because a willful violation of the bill’s requirements by a health care service plan would be a crime, this bill would impose a state-mandated local program.

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

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

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

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

SECTION 1.  

Section 1367.005 of the Health and Safety Code,
as amended by Section 7 of Chapter 572 of the Statutes of 2014,
is amended to read:

1367.005.  

(a) An individual or small group health care service
plan contract issued, amended, or renewed on or after January 1,
2014, shall, at a minimum, include coverage for essential health
benefits pursuant to PPACA and as outlined in this section. For
purposes of this section, “essential health benefits” means all of
the following:

(1) Health benefits within the categories identified in Section
1302(b) of PPACA: ambulatory patient services, emergency
services, hospitalization, maternity and newborn care, mental health
and substance use disorder services, including behavioral health
treatment, prescription drugs, rehabilitative and habilitative services
and devices, laboratory services, preventive and wellness services
and chronic disease management, and pediatric services, including
oral and vision care.

(2) (A) The health benefits covered by the Kaiser Foundation
Health Plan Small Group HMO 30 plan (federal health product
identification number 40513CA035) as this plan was offered during
the first quarter of 2012, as follows, regardless of whether the
benefits are specifically referenced in the evidence of coverage or
plan contract for that plan:

(i) Medically necessary basic health care services, as defined
in subdivision (b) of Section 1345 and in Section 1300.67 of Title
28 of the California Code of Regulations.

(ii) The health benefits mandated to be covered by the plan
pursuant to statutes enacted before December 31, 2011, as
described in the following sections: Sections 1367.002, 1367.06,
and 1367.35 (preventive services for children); Section 1367.25
(prescription drug coverage for contraceptives); Section 1367.45
(AIDS vaccine); Section 1367.46 (HIV testing); Section 1367.51
(diabetes); Section 1367.54 (alpha feto protein testing); Section
1367.6 (breast cancer screening); Section 1367.61 (prosthetics for
laryngectomy); Section 1367.62 (maternity hospital stay); Section
1367.63 (reconstructive surgery); Section 1367.635 (mastectomies);
Section 1367.64 (prostate cancer); Section 1367.65
(mammography); Section 1367.66 (cervical cancer); Section
1367.665 (cancer screening tests); Section 1367.67 (osteoporosis);
Section 1367.68 (surgical procedures for jaw bones); Section
1367.71 (anesthesia for dental); Section 1367.9 (conditions
attributable to diethylstilbestrol); Section 1368.2 (hospice care);
Section 1370.6 (cancer clinical trials); Section 1371.5 (emergency
response ambulance or ambulance transport services); subdivision
(b) of Section 1373 (sterilization operations or procedures); Section
1373.4 (inpatient hospital and ambulatory maternity); Section
1374.56 (phenylketonuria); Section 1374.17 (organ transplants for
HIV); Section 1374.72 (mental health parity); and Section 1374.73
(autism/behavioral health treatment).

(iii) Any other benefits mandated to be covered by the plan
pursuant to statutes enacted before December 31, 2011, as
described in those statutes.

(iv) The health benefits covered by the plan that are not
otherwise required to be covered under this chapter, to the extent
required pursuant to Sections 1367.18, 1367.21, 1367.215, 1367.22,
1367.24, and 1367.25, and Section 1300.67.24 of Title 28 of the
California Code of Regulations.

(v) Any other health benefits covered by the plan that are not
otherwise required to be covered under this chapter.

(B) Where there are any conflicts or omissions in the plan
identified in subparagraph (A) as compared with the requirements
for health benefits under this chapter that were enacted prior to
December 31, 2011, the requirements of this chapter shall be
controlling, except as otherwise specified in this section.

(C) Notwithstanding subparagraph (B) or any other provision
of this section, the home health services benefits covered under
the plan identified in subparagraph (A) shall be deemed to not be
in conflict with this chapter.

(D) For purposes of this section, the Paul Wellstone and Pete
Domenici Mental Health Parity and Addiction Equity Act of 2008
(Public Law 110-343) shall apply to a contract subject to this
section. Coverage of mental health and substance use disorder
services pursuant to this paragraph, along with any scope and
duration limits imposed on the benefits, shall be in compliance
with the Paul Wellstone and Pete Domenici Mental Health Parity
and Addiction Equity Act of 2008 (Public Law 110-343), and all
rules, regulations, or guidance issued pursuant to Section 2726 of
the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26).

(3) With respect to habilitative services, in addition to any
habilitative services identified in paragraph (2), coverage shall
also be provided as required by federal rules, regulations, and
guidance issued pursuant to Section 1302(b) of PPACA.
Habilitative services shall be covered under the same terms and
conditions applied to rehabilitative services under the plan contract.

(4) With respect to pediatric vision care, the same health benefits
for pediatric vision care covered under the Federal Employees
Dental and Vision Insurance Program vision plan with the largest
national enrollment as of the first quarter of 2012. The pediatric
vision care benefits covered pursuant to this paragraph shall be in
addition to, and shall not replace, any vision services covered under
the plan identified in paragraph (2).

(5) With respect to pediatric oral care, the same health benefits
for pediatric oral care covered under the dental plan available to
subscribers of the Healthy Families Program in 2011-12, including
the provision of medically necessary orthodontic care provided
pursuant to the federal Children’s Health Insurance Program
Reauthorization Act of 2009. The pediatric oral care benefits
covered pursuant to this paragraph shall be in addition to, and shall
not replace, any dental or orthodontic services covered under the
plan identified in paragraph (2).

(b) Treatment limitations imposed on health benefits described
in this section shall be no greater than the treatment limitations
imposed by the corresponding plans identified in subdivision (a),
subject to the requirements set forth in paragraph (2) of subdivision
(a).

(c) Except as provided in subdivision (d), nothing in this section
shall be construed to permit a health care service plan to make
substitutions for the benefits required to be covered under this
section, regardless of whether those substitutions are actuarially
equivalent.

(d) To the extent permitted under Section 1302 of PPACA and
any rules, regulations, or guidance issued pursuant to that section,
and to the extent that substitution would not create an obligation
for the state to defray costs for any individual, a plan may substitute
its prescription drug formulary for the formulary provided under
the plan identified in subdivision (a) as long as the coverage for
prescription drugs complies with the sections referenced in clauses
(ii) and (iv) of subparagraph (A) of paragraph (2) of subdivision
(a) that apply to prescription drugs.

(e) No health care service plan, or its agent, solicitor, or
representative, shall issue, deliver, renew, offer, market, represent,
or sell any product, contract, or discount arrangement as compliant
with the essential health benefits requirement in federal law, unless
it meets all of the requirements of this section.

(f) This section shall apply regardless of whether the plan
contract is offered inside or outside the California Health Benefit
Exchange created by Section 100500 of the Government Code.

(g) Nothing in this section shall be construed to exempt a plan
or a plan contract from meeting other applicable requirements of
law.

(h) This section shall not be construed to prohibit a plan contract
from covering additional benefits, including, but not limited to,
spiritual care services that are tax deductible under Section 213 of
the Internal Revenue Code.

(i) Subdivision (a) shall not apply to any of the following:

(1) A specialized health care service plan contract.

(2) A Medicare supplement plan.

(3) A plan contract that qualifies as a grandfathered health plan
under Section 1251 of PPACA or any rules, regulations, or
guidance issued pursuant to that section.

(j) Nothing in this section shall be implemented in a manner
that conflicts with a requirement of PPACA.

(k) This section shall be implemented only to the extent essential
health benefits are required pursuant to PPACA.

(l) An essential health benefit is required to be provided under
this section only to the extent that federal law does not require the
state to defray the costs of the benefit.

(m) Nothing in this section shall obligate the state to incur costs
for the coverage of benefits that are not essential health benefits
as defined in this section.

(n) A plan is not required to cover, under this section, changes
to health benefits that are the result of statutes enacted on or after
December 31, 2011.

(o) (1) The department may adopt emergency regulations
implementing this section. The department may, on a one-time
basis, readopt any emergency regulation authorized by this section
that is the same as, or substantially equivalent to, an emergency
regulation previously adopted under this section.

(2) The initial adoption of emergency regulations implementing
this section and the readoption of emergency regulations authorized
by this subdivision shall be deemed an emergency and necessary
for the immediate preservation of the public peace, health, safety,
or general welfare. The initial emergency regulations and the
readoption of emergency regulations authorized by this section
shall be submitted to the Office of Administrative Law for filing
with the Secretary of State and each shall remain in effect for no
more than 180 days, by which time final regulations may be
adopted.

begin insert

(3) The initial adoption of emergency regulations implementing
amendments to this section made during the 2015-16 Regular
Session of the Legislature and the readoption of emergency
regulations authorized by this subdivision shall be deemed an
emergency and necessary for the immediate preservation of the
public peace, health, safety, or general welfare. The initial
emergency regulations and the readoption of emergency
regulations authorized by this section shall be submitted to the
Office of Administrative Law for filing with the Secretary of State
and each shall remain in effect for no more than 180 days, by
which time final regulations may be adopted.

end insert begin delete

(3)

end delete

begin insert ( end insert begin insert 4) end insert  The director shall consult with the Insurance Commissioner
to ensure consistency and uniformity in the development of
regulations under this subdivision.

begin delete

(4)

end delete

begin insert ( end insert begin insert 5) end insert  This subdivision shall become inoperative on begin delete March 1, 2016. end delete
begin insert January 1, 2017. end insert

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

(1)  begin delete “Habilitative end delete begin insert (A) end insert begin insert   end insert begin insert For plan years commencing on or after
January 1, 2014, and on or before December 31, 2015,
“habilitative end insert services” means medically necessary health care
services and health care devices that assist an individual in partially
or fully acquiring or improving skills and functioning and that are
necessary to address a health condition, to the maximum extent
practical. These services address the skills and abilities needed for
functioning in interaction with an individual’s environment.
Examples of health care services that are not habilitative services
include, but are not limited to, respite care, day care, recreational
care, residential treatment, social services, custodial care, or
education services of any kind, including, but not limited to,
vocational training. Habilitative services shall be covered under
the same terms and conditions applied to rehabilitative services
under the plan contract.

begin insert

(B) For plan years commencing on or after January 1, 2016,
“habilitative services” means health care services and devices
that help a person keep, learn, or improve skills and functioning
for daily living. Examples include therapy for a child who is not
walking or talking at the expected age. These services may include
physical and occupational therapy, speech-language pathology,
and other services for people with disabilities in a variety of
inpatient or outpatient settings, or both. Habilitative services shall
be covered under the same terms and conditions applied to
rehabilitative services under the plan contract.

end insert

(2) (A) “Health benefits,” unless otherwise required to be
defined pursuant to federal rules, regulations, or guidance issued
pursuant to Section 1302(b) of PPACA, means health care items
or services for the diagnosis, cure, mitigation, treatment, or
prevention of illness, injury, disease, or a health condition,
including a behavioral health condition.

(B) “Health benefits” does not mean any cost-sharing
requirements such as copayments, coinsurance, or deductibles.

(3) “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.

(4) “Small group health care service plan contract” means a
group health care service plan contract issued to a small employer,
as defined in Section 1357.500.

(q) This section shall remain in effect only until January 1, 2017,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2017, deletes or extends that date.

SEC. 2.  

Section 1367.005 is added to the Health and Safety
Code, to read:

1367.005.  

(a) An individual or small group health care service
plan contract issued, amended, or renewed on or after January 1,
2017, shall, at a minimum, include coverage for essential health
benefits pursuant to PPACA and as outlined in this section. For
purposes of this section, “essential health benefits” means all of
the following:

(1) Health benefits within the categories identified in Section
1302(b) of PPACA: ambulatory patient services, emergency
services, hospitalization, maternity and newborn care, mental health
and substance use disorder services, including behavioral health
treatment, prescription drugs, rehabilitative and habilitative services
and devices, laboratory services, preventive and wellness services
and chronic disease management, and pediatric services, including
oral and vision care.

(2) (A) The health benefits covered by the Kaiser Foundation
Health Plan Small Group HMO 30 plan (federal health product
identification number 40513CA035) as this plan was offered during
the first quarter of 2014, as follows, regardless of whether the
benefits are specifically referenced in the evidence of coverage or
plan contract for that plan:

(i) Medically necessary basic health care services, as defined
in subdivision (b) of Section 1345 and in Section 1300.67 of Title
28 of the California Code of Regulations.

(ii) The health benefits mandated to be covered by the plan
pursuant to statutes enacted before December 31, 2011, as
described in the following sections: Sections 1367.002, 1367.06,
and 1367.35 (preventive services for children); Section 1367.25
(prescription drug coverage for contraceptives); Section 1367.45
(AIDS vaccine); Section 1367.46 (HIV testing); Section 1367.51
(diabetes); Section 1367.54 (alpha feto protein testing); Section
1367.6 (breast cancer screening); Section 1367.61 (prosthetics for
laryngectomy); Section 1367.62 (maternity hospital stay); Section
1367.63 (reconstructive surgery); Section 1367.635 (mastectomies);
Section 1367.64 (prostate cancer); Section 1367.65
(mammography); Section 1367.66 (cervical cancer); Section
1367.665 (cancer screening tests); Section 1367.67 (osteoporosis);
Section 1367.68 (surgical procedures for jaw bones); Section
1367.71 (anesthesia for dental); Section 1367.9 (conditions
attributable to diethylstilbestrol); Section 1368.2 (hospice care);
Section 1370.6 (cancer clinical trials); Section 1371.5 (emergency
response ambulance or ambulance transport services); subdivision
(b) of Section 1373 (sterilization operations or procedures); Section
1373.4 (inpatient hospital and ambulatory maternity); Section
1374.56 (phenylketonuria); Section 1374.17 (organ transplants for
HIV); Section 1374.72 (mental health parity); and Section 1374.73
(autism/behavioral health treatment).

(iii) Any other benefits mandated to be covered by the plan
pursuant to statutes enacted before December 31, 2011, as
described in those statutes.

(iv) The health benefits covered by the plan that are not
otherwise required to be covered under this chapter, to the extent
required pursuant to Sections 1367.18, 1367.21, 1367.215, 1367.22,
1367.24, and 1367.25, and Section 1300.67.24 of Title 28 of the
California Code of Regulations.

(v) Any other health benefits covered by the plan that are not
otherwise required to be covered under this chapter.

(B) Where there are any conflicts or omissions in the plan
identified in subparagraph (A) as compared with the requirements
for health benefits under this chapter that were enacted prior to
December 31, 2011, the requirements of this chapter shall be
controlling, except as otherwise specified in this section.

(C) Notwithstanding subparagraph (B) or any other provision
of this section, the home health services benefits covered under
the plan identified in subparagraph (A) shall be deemed to not be
in conflict with this chapter.

(D) For purposes of this section, the Paul Wellstone and Pete
Domenici Mental Health Parity and Addiction Equity Act of 2008
(Public Law 110-343) shall apply to a contract subject to this
section. Coverage of mental health and substance use disorder
services pursuant to this paragraph, along with any scope and
duration limits imposed on the benefits, shall be in compliance
with the Paul Wellstone and Pete Domenici Mental Health Parity
and Addiction Equity Act of 2008 (Public Law 110-343), and all
rules, regulations, or guidance issued pursuant to Section 2726 of
the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26).

(3) With respect to habilitative services, in addition to any
habilitative services begin insert and devices end insert identified in paragraph (2),
coverage shall also be provided as required by federal rules,
regulations, and guidance issued pursuant to Section 1302(b) of
PPACA. Habilitative services begin insert and devices end insert shall be covered under
the same terms and conditions applied to rehabilitative services
begin insert and devices end insert under the plan contract. Limits on habilitative and
rehabilitative services begin insert and devices end insert shall not be combined.

(4) With respect to pediatric vision care, the same health benefits
for pediatric vision care covered under the Federal Employees
Dental and Vision Insurance Program vision plan with the largest
national enrollment as of the first quarter of 2014. The pediatric
vision care benefits covered pursuant to this paragraph shall be in
addition to, and shall not replace, any vision services covered under
the plan identified in paragraph (2).

(5) With respect to pediatric oral care, the same health benefits
for pediatric oral care covered under the dental benefit received
by children under the Medi-Cal program as of 2014, including the
provision of medically necessary orthodontic care provided
pursuant to the federal Children’s Health Insurance Program
Reauthorization Act of 2009. The pediatric oral care benefits
covered pursuant to this paragraph shall be in addition to, and shall
not replace, any dental or orthodontic services covered under the
plan identified in paragraph (2).

(b) Treatment limitations imposed on health benefits described
in this section shall be no greater than the treatment limitations
imposed by the corresponding plans identified in subdivision (a),
subject to the requirements set forth in paragraph (2) of subdivision
(a).

(c) Except as provided in subdivision (d), nothing in this section
shall be construed to permit a health care service plan to make
substitutions for the benefits required to be covered under this
section, regardless of whether those substitutions are actuarially
equivalent.

(d) To the extent permitted under Section 1302 of PPACA and
any rules, regulations, or guidance issued pursuant to that section,
and to the extent that substitution would not create an obligation
for the state to defray costs for any individual, a plan may substitute
its prescription drug formulary for the formulary provided under
the plan identified in subdivision (a) as long as the coverage for
prescription drugs complies with the sections referenced in clauses
(ii) and (iv) of subparagraph (A) of paragraph (2) of subdivision
(a) that apply to prescription drugs.

(e) No health care service plan, or its agent, solicitor, or
representative, shall issue, deliver, renew, offer, market, represent,
or sell any product, contract, or discount arrangement as compliant
with the essential health benefits requirement in federal law, unless
it meets all of the requirements of this section.

(f) This section shall apply regardless of whether the plan
contract is offered inside or outside the California Health Benefit
Exchange created by Section 100500 of the Government Code.

(g) Nothing in this section shall be construed to exempt a plan
or a plan contract from meeting other applicable requirements of
law.

(h) This section shall not be construed to prohibit a plan contract
from covering additional benefits, including, but not limited to,
spiritual care services that are tax deductible under Section 213 of
the Internal Revenue Code.

(i) Subdivision (a) shall not apply to any of the following:

(1) A specialized health care service plan contract.

(2) A Medicare supplement plan.

(3) A plan contract that qualifies as a grandfathered health plan
under Section 1251 of PPACA or any rules, regulations, or
guidance issued pursuant to that section.

(j) Nothing in this section shall be implemented in a manner
that conflicts with a requirement of PPACA.

(k) This section shall be implemented only to the extent essential
health benefits are required pursuant to PPACA.

(l) An essential health benefit is required to be provided under
this section only to the extent that federal law does not require the
state to defray the costs of the benefit.

(m) Nothing in this section shall obligate the state to incur costs
for the coverage of benefits that are not essential health benefits
as defined in this section.

(n) A plan is not required to cover, under this section, changes
to health benefits that are the result of statutes enacted on or after
December 31, 2011.

(o) (1) The department may adopt emergency regulations
implementing this section. The department may, on a one-time
basis, readopt any emergency regulation authorized by this section
that is the same as, or substantially equivalent to, an emergency
regulation previously adopted under this section.

(2) The initial adoption of emergency regulations implementing
this section and the readoption of emergency regulations authorized
by this subdivision shall be deemed an emergency and necessary
for the immediate preservation of the public peace, health, safety,
or general welfare. The initial emergency regulations and the
readoption of emergency regulations authorized by this section
shall be submitted to the Office of Administrative Law for filing
with the Secretary of State and each shall remain in effect for no
more than 180 days, by which time final regulations may be
adopted.

(3) The initial adoption of emergency regulations implementing
this section made during the 2015-16 Regular Session of the
Legislature and the readoption of emergency regulations authorized
by this subdivision shall be deemed an emergency and necessary
for the immediate preservation of the public peace, health, safety,
or general welfare. The initial emergency regulations and the
readoption of emergency regulations authorized by this section
shall be submitted to the Office of Administrative Law for filing
with the Secretary of State and each shall remain in effect for no
more than 180 days, by which time final regulations may be
adopted.

(4) The director shall consult with the Insurance Commissioner
to ensure consistency and uniformity in the development of
regulations under this subdivision.

(5) This subdivision shall become inoperative on July 1, 2018.

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

(1) “Habilitative services” means health care services and
devices that help a person keep, learn, or improve skills and
functioning for daily living. Examples include therapy for a child
who is not walking or talking at the expected age. These services
may include physical and occupational therapy, speech-language
pathology, and other services for people with disabilities in a
variety of inpatient or outpatient settings, or both. Habilitative
services shall be covered under the same terms and conditions
applied to rehabilitative services under the plan contract.

(2) (A) “Health benefits,” unless otherwise required to be
defined pursuant to federal rules, regulations, or guidance issued
pursuant to Section 1302(b) of PPACA, means health care items
or services for the diagnosis, cure, mitigation, treatment, or
prevention of illness, injury, disease, or a health condition,
including a behavioral health condition.

(B) “Health benefits” does not mean any cost-sharing
requirements such as copayments, coinsurance, or deductibles.

(3) “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.

(4) “Small group health care service plan contract” means a
group health care service plan contract issued to a small employer,
as defined in Section 1357.500.

SEC. 3.  

Section 10112.27 of the Insurance Code, as amended
by Section 14 of Chapter 572 of the Statutes of 2014, is amended
to read:

10112.27.  

(a) An individual or small group health insurance
policy issued, amended, or renewed on or after January 1, 2014,
shall, at a minimum, include coverage for essential health benefits
pursuant to PPACA and as outlined in this section. This section
shall exclusively govern what benefits a health insurer must cover
as essential health benefits. For purposes of this section, “essential
health benefits” means all of the following:

(1) Health benefits within the categories identified in Section
1302(b) of PPACA: ambulatory patient services, emergency
services, hospitalization, maternity and newborn care, mental health
and substance use disorder services, including behavioral health
treatment, prescription drugs, rehabilitative and habilitative services
and devices, laboratory services, preventive and wellness services
and chronic disease management, and pediatric services, including
oral and vision care.

(2) (A) The health benefits covered by the Kaiser Foundation
Health Plan Small Group HMO 30 plan (federal health product
identification number 40513CA035) as this plan was offered during
the first quarter of 2012, as follows, regardless of whether the
benefits are specifically referenced in the plan contract or evidence
of coverage for that plan:

(i) Medically necessary basic health care services, as defined
in subdivision (b) of Section 1345 of the Health and Safety Code
and in Section 1300.67 of Title 28 of the California Code of
Regulations.

(ii) The health benefits mandated to be covered by the plan
pursuant to statutes enacted before December 31, 2011, as
described in the following sections of the Health and Safety Code:
Sections 1367.002, 1367.06, and 1367.35 (preventive services for
children); Section 1367.25 (prescription drug coverage for
contraceptives); Section 1367.45 (AIDS vaccine); Section 1367.46
(HIV testing); Section 1367.51 (diabetes); Section 1367.54 (alpha
feto protein testing); Section 1367.6 (breast cancer screening);
Section 1367.61 (prosthetics for laryngectomy); Section 1367.62
(maternity hospital stay); Section 1367.63 (reconstructive surgery);
Section 1367.635 (mastectomies); Section 1367.64 (prostate
cancer); Section 1367.65 (mammography); Section 1367.66
(cervical cancer); Section 1367.665 (cancer screening tests);
Section 1367.67 (osteoporosis); Section 1367.68 (surgical
procedures for jaw bones); Section 1367.71 (anesthesia for dental);
Section 1367.9 (conditions attributable to diethylstilbestrol);
Section 1368.2 (hospice care); Section 1370.6 (cancer clinical
trials); Section 1371.5 (emergency response ambulance or
ambulance transport services); subdivision (b) of Section 1373
(sterilization operations or procedures); Section 1373.4 (inpatient
hospital and ambulatory maternity); Section 1374.56
(phenylketonuria); Section 1374.17 (organ transplants for HIV);
Section 1374.72 (mental health parity); and Section 1374.73
(autism/behavioral health treatment).

(iii) Any other benefits mandated to be covered by the plan
pursuant to statutes enacted before December 31, 2011, as
described in those statutes.

(iv) The health benefits covered by the plan that are not
otherwise required to be covered under Chapter 2.2 (commencing
with Section 1340) of Division 2 of the Health and Safety Code,
to the extent otherwise required pursuant to Sections 1367.18,
1367.21, 1367.215, 1367.22, 1367.24, and 1367.25 of the Health
and Safety Code, and Section 1300.67.24 of Title 28 of the
California Code of Regulations.

(v) Any other health benefits covered by the plan that are not
otherwise required to be covered under Chapter 2.2 (commencing
with Section 1340) of Division 2 of the Health and Safety Code.

(B) Where there are any conflicts or omissions in the plan
identified in subparagraph (A) as compared with the requirements
for health benefits under Chapter 2.2 (commencing with Section
1340) of Division 2 of the Health and Safety Code that were
enacted prior to December 31, 2011, the requirements of Chapter
2.2 (commencing with Section 1340) of Division 2 of the Health
and Safety Code shall be controlling, except as otherwise specified
in this section.

(C) Notwithstanding subparagraph (B) or any other provision
of this section, the home health services benefits covered under
the plan identified in subparagraph (A) shall be deemed to not be
in conflict with Chapter 2.2 (commencing with Section 1340) of
Division 2 of the Health and Safety Code.

(D) For purposes of this section, the Paul Wellstone and Pete
Domenici Mental Health Parity and Addiction Equity Act of 2008
(Public Law 110-343) shall apply to a policy subject to this section.
Coverage of mental health and substance use disorder services
pursuant to this paragraph, along with any scope and duration
limits imposed on the benefits, shall be in compliance with the
Paul Wellstone and Pete Domenici Mental Health Parity and
Addiction Equity Act of 2008 (Public Law 110-343), and all rules,
regulations, and guidance issued pursuant to Section 2726 of the
federal Public Health Service Act (42 U.S.C. Sec. 300gg-26).

(3) With respect to habilitative services, in addition to any
habilitative services identified in paragraph (2), coverage shall
also be provided as required by federal rules, regulations, or
guidance issued pursuant to Section 1302(b) of PPACA.
Habilitative services shall be covered under the same terms and
conditions applied to rehabilitative services under the policy.

(4) With respect to pediatric vision care, the same health benefits
for pediatric vision care covered under the Federal Employees
Dental and Vision Insurance Program vision plan with the largest
national enrollment as of the first quarter of 2012. The pediatric
vision care services covered pursuant to this paragraph shall be in
addition to, and shall not replace, any vision services covered under
the plan identified in paragraph (2).

(5) With respect to pediatric oral care, the same health benefits
for pediatric oral care covered under the dental plan available to
subscribers of the Healthy Families Program in 2011-12, including
the provision of medically necessary orthodontic care provided
pursuant to the federal Children’s Health Insurance Program
Reauthorization Act of 2009. The pediatric oral care benefits
covered pursuant to this paragraph shall be in addition to, and shall
not replace, any dental or orthodontic services covered under the
plan identified in paragraph (2).

(b) Treatment limitations imposed on health benefits described
in this section shall be no greater than the treatment limitations
imposed by the corresponding plans identified in subdivision (a),
subject to the requirements set forth in paragraph (2) of subdivision
(a).

(c) Except as provided in subdivision (d), nothing in this section
shall be construed to permit a health insurer to make substitutions
for the benefits required to be covered under this section, regardless
of whether those substitutions are actuarially equivalent.

(d) To the extent permitted under Section 1302 of PPACA and
any rules, regulations, or guidance issued pursuant to that section,
and to the extent that substitution would not create an obligation
for the state to defray costs for any individual, an insurer may
substitute its prescription drug formulary for the formulary
provided under the plan identified in subdivision (a) as long as the
coverage for prescription drugs complies with the sections
referenced in clauses (ii) and (iv) of subparagraph (A) of paragraph
(2) of subdivision (a) that apply to prescription drugs.

(e) No health insurer, or its agent, producer, or representative,
shall issue, deliver, renew, offer, market, represent, or sell any
product, policy, or discount arrangement as compliant with the
essential health benefits requirement in federal law, unless it meets
all of the requirements of this section. This subdivision shall be
enforced in the same manner as Section 790.03, including through
the means specified in Sections 790.035 and 790.05.

(f) This section shall apply regardless of whether the policy is
offered inside or outside the California Health Benefit Exchange
created by Section 100500 of the Government Code.

(g) Nothing in this section shall be construed to exempt a health
insurer or a health insurance policy from meeting other applicable
requirements of law.

(h) This section shall not be construed to prohibit a policy from
covering additional benefits, including, but not limited to, spiritual
care services that are tax deductible under Section 213 of the
Internal Revenue Code.

(i) Subdivision (a) shall not apply to any of the following:

(1) A policy that provides excepted benefits as described in
Sections 2722 and 2791 of the federal Public Health Service Act
(42 U.S.C. Sec. 300gg-21; 42 U.S.C. Sec. 300gg-91).

(2) A policy that qualifies as a grandfathered health plan under
Section 1251 of PPACA or any binding rules, regulation, or
guidance issued pursuant to that section.

(j) Nothing in this section shall be implemented in a manner
that conflicts with a requirement of PPACA.

(k) This section shall be implemented only to the extent essential
health benefits are required pursuant to PPACA.

(l) An essential health benefit is required to be provided under
this section only to the extent that federal law does not require the
state to defray the costs of the benefit.

(m) Nothing in this section shall obligate the state to incur costs
for the coverage of benefits that are not essential health benefits
as defined in this section.

(n) An insurer is not required to cover, under this section,
changes to health benefits that are the result of statutes enacted on
or after December 31, 2011.

(o) (1) The commissioner may adopt emergency regulations
implementing this section. The commissioner may, on a one-time
basis, readopt any emergency regulation authorized by this section
that is the same as, or substantially equivalent to, an emergency
regulation previously adopted under this section.

(2) The initial adoption of emergency regulations implementing
this section and the readoption of emergency regulations authorized
by this subdivision shall be deemed an emergency and necessary
for the immediate preservation of the public peace, health, safety,
or general welfare. The initial emergency regulations and the
readoption of emergency regulations authorized by this section
shall be submitted to the Office of Administrative Law for filing
with the Secretary of State and each shall remain in effect for no
more than 180 days, by which time final regulations may be
adopted.

begin insert

(3) The initial adoption of emergency regulations implementing
this section made during the 2015-16 Regular Session of the
Legislature and the readoption of emergency regulations
authorized by this subdivision shall be deemed an emergency and
necessary for the immediate preservation of the public peace,
health, safety, or general welfare. The initial emergency
regulations and the readoption of emergency regulations
authorized by this section shall be submitted to the Office of
Administrative Law for filing with the Secretary of State and each
shall remain in effect for no more than 180 days, by which time
final regulations may be adopted.

end insert begin delete

(3)

end delete

begin insert (4 end insert begin insert ) end insert  The commissioner shall consult with the Director of the
Department of Managed Health Care to ensure consistency and
uniformity in the development of regulations under this
subdivision.

begin delete

(4)

end delete

begin insert ( end insert begin insert 5) end insert  This subdivision shall become inoperative on begin delete March 1, 2016. end delete
begin insert January 1, 2017. end insert

(p) Nothing in this section shall impose on health insurance
policies the cost sharing or network limitations of the plans
identified in subdivision (a) except to the extent otherwise required
to comply with provisions of this code, including this section, and
as otherwise applicable to all health insurance policies offered to
individuals and small groups.

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

(1)  begin delete “Habilitative end delete begin insert (A) end insert begin insert   end insert begin insert For plan years commencing on or after
January 1, 2014, and on or before December 31, 2015,
“habilitative end insert services” means medically necessary health care
services and health care devices that assist an individual in partially
or fully acquiring or improving skills and functioning and that are
necessary to address a health condition, to the maximum extent
practical. These services address the skills and abilities needed for
functioning in interaction with an individual’s environment.
Examples of health care services that are not habilitative services
include, but are not limited to, respite care, day care, recreational
care, residential treatment, social services, custodial care, or
education services of any kind, including, but not limited to,
vocational training. Habilitative services shall be covered under
the same terms and conditions applied to rehabilitative services
under the policy.

begin insert

(B) For plan years commencing on or after January 1, 2016,
“habilitative services” means health care services and devices
that help a person keep, learn, or improve skills and functioning
for daily living. Examples include therapy for a child who is not
walking or talking at the expected age. These services may include
physical and occupational therapy, speech-language pathology,
and other services for people with disabilities in a variety of
inpatient or outpatient settings, or both. Habilitative services shall
be covered under the same terms and conditions applied to
rehabilitative services under the policy.

end insert

(2) (A) “Health benefits,” unless otherwise required to be
defined pursuant to federal rules, regulations, or guidance issued
pursuant to Section 1302(b) of PPACA, means health care items
or services for the diagnosis, cure, mitigation, treatment, or
prevention of illness, injury, disease, or a health condition,
including a behavioral health condition.

(B) “Health benefits” does not mean any cost-sharing
requirements such as copayments, coinsurance, or deductibles.

(3) “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.

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

(r) This section shall remain in effect only until January 1, 2017,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2017, deletes or extends that date.

SEC. 4.  

Section 10112.27 is added to the Insurance Code, to
read:

10112.27.  

(a) An individual or small group health insurance
policy issued, amended, or renewed on or after January 1, 2017,
shall, at a minimum, include coverage for essential health benefits
pursuant to PPACA and as outlined in this section. This section
shall exclusively govern what benefits a health insurer must cover
as essential health benefits. For purposes of this section, “essential
health benefits” means all of the following:

(1) Health benefits within the categories identified in Section
1302(b) of PPACA: ambulatory patient services, emergency
services, hospitalization, maternity and newborn care, mental health
and substance use disorder services, including behavioral health
treatment, prescription drugs, rehabilitative and habilitative services
and devices, laboratory services, preventive and wellness services
and chronic disease management, and pediatric services, including
oral and vision care.

(2) (A) The health benefits covered by the Kaiser Foundation
Health Plan Small Group HMO 30 plan (federal health product
identification number 40513CA035) as this plan was offered during
the first quarter of 2014, as follows, regardless of whether the
benefits are specifically referenced in the plan contract or evidence
of coverage for that plan:

(i) Medically necessary basic health care services, as defined
in subdivision (b) of Section 1345 of the Health and Safety Code
and in Section 1300.67 of Title 28 of the California Code of
Regulations.

(ii) The health benefits mandated to be covered by the plan
pursuant to statutes enacted before December 31, 2011, as
described in the following sections of the Health and Safety Code:
Sections 1367.002, 1367.06, and 1367.35 (preventive services for
children); Section 1367.25 (prescription drug coverage for
contraceptives); Section 1367.45 (AIDS vaccine); Section 1367.46
(HIV testing); Section 1367.51 (diabetes); Section 1367.54 (alpha
feto protein testing); Section 1367.6 (breast cancer screening);
Section 1367.61 (prosthetics for laryngectomy); Section 1367.62
(maternity hospital stay); Section 1367.63 (reconstructive surgery);
Section 1367.635 (mastectomies); Section 1367.64 (prostate
cancer); Section 1367.65 (mammography); Section 1367.66
(cervical cancer); Section 1367.665 (cancer screening tests);
Section 1367.67 (osteoporosis); Section 1367.68 (surgical
procedures for jaw bones); Section 1367.71 (anesthesia for dental);
Section 1367.9 (conditions attributable to diethylstilbestrol);
Section 1368.2 (hospice care); Section 1370.6 (cancer clinical
trials); Section 1371.5 (emergency response ambulance or
ambulance transport services); subdivision (b) of Section 1373
(sterilization operations or procedures); Section 1373.4 (inpatient
hospital and ambulatory maternity); Section 1374.56
(phenylketonuria); Section 1374.17 (organ transplants for HIV);
Section 1374.72 (mental health parity); and Section 1374.73
(autism/behavioral health treatment).

(iii) Any other benefits mandated to be covered by the plan
pursuant to statutes enacted before December 31, 2011, as
described in those statutes.

(iv) The health benefits covered by the plan that are not
otherwise required to be covered under Chapter 2.2 (commencing
with Section 1340) of Division 2 of the Health and Safety Code,
to the extent otherwise required pursuant to Sections 1367.18,
1367.21, 1367.215, 1367.22, 1367.24, and 1367.25 of the Health
and Safety Code, and Section 1300.67.24 of Title 28 of the
California Code of Regulations.

(v) Any other health benefits covered by the plan that are not
otherwise required to be covered under Chapter 2.2 (commencing
with Section 1340) of Division 2 of the Health and Safety Code.

(B) Where there are any conflicts or omissions in the plan
identified in subparagraph (A) as compared with the requirements
for health benefits under Chapter 2.2 (commencing with Section
1340) of Division 2 of the Health and Safety Code that were
enacted prior to December 31, 2011, the requirements of Chapter
2.2 (commencing with Section 1340) of Division 2 of the Health
and Safety Code shall be controlling, except as otherwise specified
in this section.

(C) Notwithstanding subparagraph (B) or any other provision
of this section, the home health services benefits covered under
the plan identified in subparagraph (A) shall be deemed to not be
in conflict with Chapter 2.2 (commencing with Section 1340) of
Division 2 of the Health and Safety Code.

(D) For purposes of this section, the Paul Wellstone and Pete
Domenici Mental Health Parity and Addiction Equity Act of 2008
(Public Law 110-343) shall apply to a policy subject to this section.
Coverage of mental health and substance use disorder services
pursuant to this paragraph, along with any scope and duration
limits imposed on the benefits, shall be in compliance with the
Paul Wellstone and Pete Domenici Mental Health Parity and
Addiction Equity Act of 2008 (Public Law 110-343), and all rules,
regulations, and guidance issued pursuant to Section 2726 of the
federal Public Health Service Act (42 U.S.C. Sec. 300gg-26).

(3) With respect to habilitative services, in addition to any
habilitative services begin insert and devices end insert identified in paragraph (2),
coverage shall also be provided as required by federal rules,
regulations, or guidance issued pursuant to Section 1302(b) of
PPACA. Habilitative services begin insert and devices end insert shall be covered under
the same terms and conditions applied to rehabilitative services
begin insert and devices end insert under the policy. Limits on habilitative and
rehabilitative services begin insert and devices end insert shall not be combined.

(4) With respect to pediatric vision care, the same health benefits
for pediatric vision care covered under the Federal Employees
Dental and Vision Insurance Program vision plan with the largest
national enrollment as of the first quarter of 2014. The pediatric
vision care services covered pursuant to this paragraph shall be in
addition to, and shall not replace, any vision services covered under
the plan identified in paragraph (2).

(5) With respect to pediatric oral care, the same health benefits
for pediatric oral care covered under the dental benefit received
by children under Medi-Cal as of 2014, including the provision of
medically necessary orthodontic care provided pursuant to the
federal Children’s Health Insurance Program Reauthorization Act
of 2009. The pediatric oral care benefits covered pursuant to this
paragraph shall be in addition to, and shall not replace, any dental
or orthodontic services covered under the plan identified in
paragraph (2).

(b) Treatment limitations imposed on health benefits described
in this section shall be no greater than the treatment limitations
imposed by the corresponding plans identified in subdivision (a),
subject to the requirements set forth in paragraph (2) of subdivision
(a).

(c) Except as provided in subdivision (d), nothing in this section
shall be construed to permit a health insurer to make substitutions
for the benefits required to be covered under this section, regardless
of whether those substitutions are actuarially equivalent.

(d) To the extent permitted under Section 1302 of PPACA and
any rules, regulations, or guidance issued pursuant to that section,
and to the extent that substitution would not create an obligation
for the state to defray costs for any individual, an insurer may
substitute its prescription drug formulary for the formulary
provided under the plan identified in subdivision (a) as long as the
coverage for prescription drugs complies with the sections
referenced in clauses (ii) and (iv) of subparagraph (A) of paragraph
(2) of subdivision (a) that apply to prescription drugs.

(e) No health insurer, or its agent, producer, or representative,
shall issue, deliver, renew, offer, market, represent, or sell any
product, policy, or discount arrangement as compliant with the
essential health benefits requirement in federal law, unless it meets
all of the requirements of this section. This subdivision shall be
enforced in the same manner as Section 790.03, including through
the means specified in Sections 790.035 and 790.05.

(f) This section shall apply regardless of whether the policy is
offered inside or outside the California Health Benefit Exchange
created by Section 100500 of the Government Code.

(g) Nothing in this section shall be construed to exempt a health
insurer or a health insurance policy from meeting other applicable
requirements of law.

(h) This section shall not be construed to prohibit a policy from
covering additional benefits, including, but not limited to, spiritual
care services that are tax deductible under Section 213 of the
Internal Revenue Code.

(i) Subdivision (a) shall not apply to any of the following:

(1) A policy that provides excepted benefits as described in
Sections 2722 and 2791 of the federal Public Health Service Act
(42 U.S.C. Sec. 300gg-21; 42 U.S.C. Sec. 300gg-91).

(2) A policy that qualifies as a grandfathered health plan under
Section 1251 of PPACA or any binding rules, regulation, or
guidance issued pursuant to that section.

(j) Nothing in this section shall be implemented in a manner
that conflicts with a requirement of PPACA.

(k) This section shall be implemented only to the extent essential
health benefits are required pursuant to PPACA.

(l) An essential health benefit is required to be provided under
this section only to the extent that federal law does not require the
state to defray the costs of the benefit.

(m) Nothing in this section shall obligate the state to incur costs
for the coverage of benefits that are not essential health benefits
as defined in this section.

(n) An insurer is not required to cover, under this section,
changes to health benefits that are the result of statutes enacted on
or after December 31, 2011.

(o) (1) The commissioner may adopt emergency regulations
implementing this section. The commissioner may, on a one-time
basis, readopt any emergency regulation authorized by this section
that is the same as, or substantially equivalent to, an emergency
regulation previously adopted under this section.

(2) The initial adoption of emergency regulations implementing
this section and the readoption of emergency regulations authorized
by this subdivision shall be deemed an emergency and necessary
for the immediate preservation of the public peace, health, safety,
or general welfare. The initial emergency regulations and the
readoption of emergency regulations authorized by this section
shall be submitted to the Office of Administrative Law for filing
with the Secretary of State and each shall remain in effect for no
more than 180 days, by which time final regulations may be
adopted.

(3) The initial adoption of emergency regulations implementing
this section made during the 2015-16 Regular Session of the
Legislature and the readoption of emergency regulations authorized
by this subdivision shall be deemed an emergency and necessary
for the immediate preservation of the public peace, health, safety,
or general welfare. The initial emergency regulations and the
readoption of emergency regulations authorized by this section
shall be submitted to the Office of Administrative Law for filing
with the Secretary of State and each shall remain in effect for no
more than 180 days, by which time final regulations may be
adopted.

(4) The commissioner shall consult with the Director of the
Department of Managed Health Care to ensure consistency and
uniformity in the development of regulations under this
subdivision.

(5) This subdivision shall become inoperative on July 1, 2018.

(p) Nothing in this section shall impose on health insurance
policies the cost sharing or network limitations of the plans
identified in subdivision (a) except to the extent otherwise required
to comply with provisions of this code, including this section, and
as otherwise applicable to all health insurance policies offered to
individuals and small groups.

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

(1) “Habilitative services” means health care services and
devices that help a person keep, learn, or improve skills and
functioning for daily living. Examples include therapy for a child
who is not walking or talking at the expected age. These services
may include physical and occupational therapy, speech-language
pathology, and other services for people with disabilities in a
variety of inpatient or outpatient settings, or both. Habilitative
services shall be covered under the same terms and conditions
applied to rehabilitative services under the policy.

(2) (A) “Health benefits,” unless otherwise required to be
defined pursuant to federal rules, regulations, or guidance issued
pursuant to Section 1302(b) of PPACA, means health care items
or services for the diagnosis, cure, mitigation, treatment, or
prevention of illness, injury, disease, or a health condition,
including a behavioral health condition.

(B) “Health benefits” does not mean any cost-sharing
requirements such as copayments, coinsurance, or deductibles.

(3) “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.

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

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.

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CORRECTIONS:

Amended House--Page 1.

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