Amended in Senate May 31, 2016

Amended in Senate March 29, 2016

Senate Bill No. 908

Introduced by Senator Hernandez

January 26, 2016

An act to amend Sections 1374.21 and 1389.25 of the Health and Safety Code, and to amend Sections 10113.9 and 10199.1 of the Insurance Code, relating to health care coverage.

LEGISLATIVE COUNSEL’S DIGEST

SB 908, as amended, Hernandez. Health care coverage: premium rate change: notice: other health 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 its provisions a crime. Existing law provides for the licensure and regulation of health insurers by the Department of Insurance.

Existing law prohibits, among other things, a change in premium rates for group health care service plan contracts and group health insurance policies from becoming effective unless a written notice is delivered as specified.

This bill would require, if the Department of Managed Health Care or the Department of Insurance determines that a group rate is unreasonable or not justified, the contractholder or policyholder to be notified by the health care service plan or health insurer in writing of that determination, and would require the contractholder or policyholder to be given 60 days to obtain other health coverage from the existing coverage provider or another provider. begin delete During the 60-day period the contractholder or policyholder would continue to be covered at the prior rate. end delete With respect to small group plan contracts or policies offered through the Exchange, the bill would exempt these circumstances from the requirement that a health care service plan or health insurer limit enrollment in a small group health care service plan contract or health insurance policy to specified open, annual, or special enrollment periods.

Existing law prohibits, among other things, a change in premium rates for individual health care service plan contracts and individual health insurance policies from becoming effective unless a written notice is delivered as specified. Existing law requires health care service plans and health insurers to limit enrollment in individual health benefit plans to specified open enrollment, annual enrollment, and special enrollment periods. Existing law, subject to certain provisions, requires a health care service plan or health insurer to allow an individual to enroll in or change individual health benefit plans as a result of specified triggering events for the purposes of a special enrollment period.

This bill would require, if the Department of Managed Health Care or the Department of Insurance determines that an individual rate is unreasonable or not justified, the contractholder or policyholder to be notified by the health care service plan or health insurer in writing of that determination, and would require, if the open enrollment period has closed for the applicable rate year or there are fewer than 60 days remaining in the open enrollment period for the applicable rate year, the contractholder or policyholder to be given 60 days to obtain other coverage from the existing coverage provider or another provider. During the 60-day period the contractholder or policyholder would continue to be covered at the prior rate. The bill would provide that this notification provided to the contractholder or policyholder constitutes a triggering event for purposes of special enrollment periods in the individual market if the open enrollment period has closed for the applicable rate year or there are fewer than 60 days remaining in the open enrollment period for the applicable rate year.

This bill would also revise obsolete references and make other technical, nonsubstantive changes.

Because a willful violation of the bill’s requirements with respect to health care service plans would be a crime, the 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 1374.21 of the Health and Safety Code
is amended to read:

1374.21.  

(a) (1) A change in premium rates or changes in
coverage stated in a group health care service plan contract shall
not become effective unless the plan has delivered in writing a
notice indicating the change or changes at least 60 days prior to
the contract renewal effective date.

(2) The notice delivered pursuant to paragraph (1) for large
group health plans shall also include the following information:

(A) Whether the rate proposed to be in effect is greater than the
average rate increase for individual market products negotiated by
the California Health Benefit Exchange for the most recent calendar
year for which the rates are final.

(B) Whether the rate proposed to be in effect is greater than the
average rate increase negotiated by the Board of Administration
of the Public Employees’ Retirement System for the most recent
calendar year for which the rates are final.

(C) Whether the rate change includes any portion of the excise
tax paid by the health plan.

(b) A health care service plan that declines to offer coverage to
or denies enrollment for a large group applying for coverage shall,
at the time of the denial of coverage, provide the applicant with
the specific reason or reasons for the decision in writing, in clear,
easily understandable language.

(c) (1) Notwithstanding subdivision (b) of Section 1357.503,
if the department determines that a rate is unreasonable or not
justified consistent with Article 6.2 (commencing with Section
1385.01), the plan shall notify the contractholder of this
determination and shall offer the contractholder coverage of no
less than 60 days in order for the contractholder to obtain other
coverage, including coverage from another health care service
plan. begin delete During the 60-day period, the prior rate shall remain in effect
to allow the purchaser the opportunity to obtain other coverage. end delete

(2) The notification to the contractholder shall state the
following in 14-point type:

“The Department of Managed Health Care has determined that
the rate for this product is not reasonable or not justified. All health
coverage offered to employers like you is reviewed to determine
whether the rates are reasonable and justified. For the next 60 days
from the date of this notice you have the option to obtain other
coverage from this health plan or another health plan. begin delete During this
60-day period, the prior rate shall remain in effect. end delete For small
business purchasers, you may contact Covered California at
www.coveredca.com for help in obtaining coverage.”

begin insert

(3) The plan may include in the notification to the contractholder
the Internet Web site address at which the plan’s final justification
for implementing an increase that has been determined to be
unreasonable by the director may be found pursuant to Section
154.230 of Title 45 of the Code of Federal Regulations.

end insert begin delete

(3)

end delete

begin insert ( end insert begin insert 4) end insert  The notice shall also be provided to the solicitor for the
contractholder, if any, so that the solicitor may assist the purchaser
in finding other coverage.

SEC. 2.  

Section 1389.25 of the Health and Safety Code is
amended to read:

1389.25.  

(a) (1) This section shall apply only to a full service
health care service plan offering health coverage in the individual
market in California and shall not apply to a specialized health
care service plan, a health care service plan contract in the
Medi-Cal program (Chapter 7 (commencing with Section 14000)
of Part 3 of Division 9 of the Welfare and Institutions Code), a
health care service plan conversion contract offered pursuant to
Section 1373.6, a health care service plan contract in the Healthy
Families Program (Part 6.2 (commencing with Section 12693) of
Division 2 of the Insurance Code), or a health care service plan
contract offered to a federally eligible defined individual under
Article 4.6 (commencing with Section 1366.35).

(2) A local initiative, as defined in subdivision (w) of Section
53810 of Title 22 of the California Code of Regulations, that is
awarded a contract by the State Department of Health Care Services
pursuant to subdivision (b) of Section 53800 of Title 22 of the
California Code of Regulations, shall not be subject to this section
unless the plan offers coverage in the individual market to persons
not covered by Medi-Cal or the Healthy Families Program.

(b) (1) No change in the premium rate or coverage for an
individual plan contract shall become effective unless the plan has
delivered a written notice of the change at least 15 days prior to
the start of the annual enrollment period applicable to the contract
or 60 days prior to the effective date of the contract renewal,
whichever occurs earlier in the calendar year.

(2) The written notice required pursuant to paragraph (1) shall
be delivered to the individual contractholder at his or her last
address known to the plan. The notice shall state in italics and in
12-point type the actual dollar amount of the premium rate increase
and the specific percentage by which the current premium will be
increased. The notice shall describe in plain, understandable
English any changes in the plan design or any changes in benefits,
including a reduction in benefits or changes to waivers, exclusions,
or conditions, and highlight this information by printing it in italics.
The notice shall specify in a minimum of 10-point bold typeface,
the reason for a premium rate change or a change to the plan design
or benefits.

(c) (1) Notwithstanding subdivision (c) of Section 1399.849,
if the department determines that a rate is unreasonable or not
justified consistent with Article 6.2 (commencing with Section
1385.01), the plan shall notify the contractholder of this
determination and, if the open enrollment period has closed for
the applicable rate year or there are fewer than 60 days remaining
in the open enrollment period for the applicable rate year, shall
offer the contractholder coverage of no less than 60 days to obtain
other coverage, including coverage from another health care service
plan. During the 60-day period, the prior rate shall remain in effect
to allow the purchaser the opportunity to obtain other coverage.

(2) If it is prior to the open enrollment period for the applicable
rate year, the notification to the contractholder shall state the
following in 14-point type:

“The Department of Managed Health Care has determined that
the rate for this product is not reasonable or not justified. All health
coverage offered to individuals like you is reviewed to determine
whether the rates are reasonable and justified. Open enrollment is
from [insert day of month and year] to [insert day of month and
year]. During that time, you have the option to obtain other
coverage from this health plan or another health plan. You may
also contact Covered California at www.coveredca.com for help
in obtaining coverage. Many Californians are eligible for financial
assistance from Covered California to help pay for begin delete coverage. end delete

begin insert coverage. end insert begin insert ” end insert

(3) If there are less than 60 days remaining in the open
enrollment period for the applicable rate year or after the open
enrollment period has closed for the applicable rate year, the
notification to the contractholder shall state the following in
14-point type:

“The Department of Managed Health Care has determined that
the rate for this product is not reasonable or not justified. All health
coverage offered to individuals like you is reviewed to determine
whether the rates are reasonable and justified. For the next 60 days
from the date of this notice you have the option to obtain other
coverage from this health plan or another health plan. During this
60-day period, the prior rate shall remain in effect. You may also
contact Covered California at www.coveredca.com for help in
obtaining coverage. Many Californians are eligible for financial
assistance from Covered California to help pay for coverage.”

begin insert

(4) The plan may include in the notification to the contractholder
the Internet Web site address at which the plan’s final justification
for implementing an increase that has been determined to be
unreasonable by the director may be found pursuant to Section
154.230 of Title 45 of the Code of Federal Regulations.

end insert begin delete

(4)

end delete

begin insert ( end insert begin insert 5) end insert  The notice shall also be provided to the solicitor for the
contractholder, if any, so that the solicitor may assist the purchaser
in finding other coverage.

begin delete

(5)

end delete

begin insert ( end insert begin insert 6) end insert  The notice shall constitute a triggering event for purposes
of special enrollment, as defined in Section 1399.849 if the open
enrollment period has closed for the applicable rate year or there
are fewer than 60 days remaining in the open enrollment period
for the applicable rate year.

(d) If a plan rejects a dependent of a subscriber applying to be
added to the subscriber’s individual grandfathered health plan,
rejects an applicant for a Medicare supplement plan contract due
to the applicant having end-stage renal disease, or offers an
individual grandfathered health plan to an applicant at a rate that
is higher than the standard rate, the plan shall inform the applicant
about the California Major Risk Medical Insurance Program
(MRMIP) (Chapter 4 (commencing with Section 15870) of Part
3.3 of Division 9 of the Welfare and Institutions Code) and about
the new coverage options and the potential for subsidized coverage
through Covered California. The plan shall direct persons seeking
more information to MRMIP, Covered California, plan or policy
representatives, insurance agents, or an entity paid by Covered
California to assist with health coverage enrollment, such as a
navigator or an assister.

(e) A notice provided pursuant to this section is a private and
confidential communication and, at the time of application, the
plan shall give the individual applicant the opportunity to designate
the address for receipt of the written notice in order to protect the
confidentiality of any personal or privileged information.

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

(1) “Covered California” means the California Health Benefit
Exchange established pursuant to Section 100500 of the
Government Code.

(2) “Grandfathered health plan” has the same meaning as that
term is defined in Section 1251 of PPACA.

(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 pursuant to that law.

SEC. 3.  

Section 10113.9 of the Insurance Code is amended to
read:

10113.9.  

(a) This section shall not apply to short-term limited
duration health insurance, vision-only, dental-only, or
CHAMPUS-supplement insurance, or to hospital indemnity,
hospital-only, accident-only, or specified disease insurance that
does not pay benefits on a fixed benefit, cash payment only basis.

(b) (1) No change in the premium rate or coverage for an
individual health insurance policy shall become effective unless
the insurer has delivered a written notice of the change at least 15
days prior to the start of the annual enrollment period applicable
to the policy or 60 days prior to the effective date of the policy
renewal, whichever occurs earlier in the calendar year.

(2) The written notice required pursuant to paragraph (1) shall
be delivered to the individual policyholder at his or her last address
known to the insurer. The notice shall state in italics and in 12-point
type the actual dollar amount of the premium increase and the
specific percentage by which the current premium will be
increased. The notice shall describe in plain, understandable
English any changes in the policy or any changes in benefits,
including a reduction in benefits or changes to waivers, exclusions,
or conditions, and highlight this information by printing it in italics.
The notice shall specify in a minimum of 10-point bold typeface,
the reason for a premium rate change or a change in coverage or
benefits.

(c) (1) Notwithstanding subdivision (c) of Section 10965.3, if
the department determines that a rate is unreasonable or not
justified consistent with Article 4.5 (commencing with Section
10181), the insurer shall notify the policyholder of this
determination and, if the open enrollment period has closed for
the applicable rate year or there are fewer than 60 days remaining
in the open enrollment period for the applicable rate year, shall
offer the policyholder coverage of no less than 60 days in order to
obtain other coverage, including coverage from another health
insurer. During the 60-day period, the prior rate shall remain in
effect to allow the purchaser the opportunity to obtain other
coverage.

(2) If it is prior to the open enrollment period for the applicable
rate year, the notification to the policyholder shall state the
following in 14-point type:

“The Department of Insurance has determined that the rate for
this product is not reasonable and is not justified. All health
coverage offered to individuals like you is reviewed to determine
whether the rates are reasonable and justified. Open enrollment is
from [insert day of month and year] to [insert day of month and
year]. During that time, you have the option to obtain other
coverage from this health insurer or another health insurer. You
may also contact Covered California at www.coveredca.com for
help in obtaining coverage. Many Californians are eligible for
financial assistance from Covered California to help pay for
coverage.”

(3) If there are less than 60 days remaining in the open
enrollment period for the applicable rate year or after the open
enrollment period has closed for the applicable rate year, the
notification to the policyholder shall state the following in 14-point
type:

“The Department of Insurance has determined that the rate for
this product is not reasonable or not justified. All health coverage
offered to individuals like you is reviewed to determine whether
the rates are reasonable and justified. For the next 60 days from
the date of this notice you have the option to obtain other coverage
from this health insurer or another health insurer. During the 60-day
period, the prior rate shall remain in effect. You may also contact
Covered California at www.coveredca.com for help in obtaining
coverage. Many Californians are eligible for financial assistance
from Covered California to help pay for coverage.”

begin insert

(4) The insurer may include in the notification to the
policyholder the Internet Web site address at which the insurer’s
final justification for implementing an increase that has been
determined to be unreasonable by the commissioner may be found
pursuant to Section 154.230 of Title 45 of the Code of Federal
Regulations.

end insert begin delete

(4)

end delete

begin insert ( end insert begin insert 5) end insert  The notice shall also be provided to the agent of record for
the policyholder, if any, so that the agent may assist the purchaser
in finding other coverage.

begin delete

(5)

end delete

begin insert ( end insert begin insert 6) end insert  The notice shall constitute a triggering event for purposes
of special enrollment, as defined in Section 10965.3 if the open
enrollment period has closed for the applicable rate year or there
are fewer than 60 days remaining in the open enrollment period
for the applicable rate year.

(d) If an insurer rejects a dependent of a policyholder applying
to be added to the policyholder’s individual grandfathered health
plan, rejects an applicant for a Medicare supplement policy due
to the applicant having end-stage renal disease, or offers an
individual grandfathered health plan to an applicant at a rate that
is higher than the standard rate, the insurer shall inform the
applicant about the California Major Risk Medical Insurance
Program (MRMIP) (Chapter 4 (commencing with Section 15870)
of Part 3.3 of Division 9 of the Welfare and Institutions Code) and
about the new coverage options and the potential for subsidized
coverage through Covered California. The insurer shall direct
persons seeking more information to MRMIP, Covered California,
plan or policy representatives, insurance agents, or an entity paid
by Covered California to assist with health coverage enrollment,
such as a navigator or an assister.

(e) A notice provided pursuant to this section is a private and
confidential communication and, at the time of application, the
insurer shall give the applicant the opportunity to designate the
address for receipt of the written notice in order to protect the
confidentiality of any personal or privileged information.

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

(1) “Covered California” means the California Health Benefit
Exchange established pursuant to Section 100500 of the
Government Code.

(2) “Grandfathered health plan” has the same meaning as that
term is defined in Section 1251 of PPACA.

(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 pursuant to that law.

SEC. 4.  

Section 10199.1 of the Insurance Code is amended to
read:

10199.1.  

(a) (1) An insurer or nonprofit hospital service plan
or administrator acting on its behalf shall not terminate a group
master policy or contract providing hospital, medical, or surgical
benefits, increase premiums or charges therefor, reduce or eliminate
benefits thereunder, or restrict eligibility for coverage thereunder
without providing prior notice of that action. The action shall not
become effective unless written notice of the action was delivered
by mail to the last known address of the appropriate insurance
producer and the appropriate administrator, if any, at least 45 days
prior to the effective date of the action and to the last known
address of the group policyholder or group contractholder at least
60 days prior to the effective date of the action. If nonemployee
certificate holders or employees of more than one employer are
covered under the policy or contract, written notice shall also be
delivered by mail to the last known address of each nonemployee
certificate holder or affected employer or, if the action does not
affect all employees and dependents of one or more employers, to
the last known address of each affected employee certificate holder,
at least 60 days prior to the effective date of the action.

(2) The notice delivered pursuant to paragraph (1) for large
group health insurance policies shall also include the following
information:

(A) Whether the rate proposed to be in effect is greater than the
average rate increase for individual market products negotiated by
the California Health Benefit Exchange for the most recent calendar
year for which the rates are final.

(B) Whether the rate proposed to be in effect is greater than the
average rate increase negotiated by the Board of Administration
of the Public Employees’ Retirement System for the most recent
calendar year for which the rates are final.

(C) Whether the rate change includes any portion of the excise
tax paid by the health insurer.

(b) A holder of a master group policy or a master group
nonprofit hospital service plan contract or administrator acting on
its behalf shall not terminate the coverage of, increase premiums
or charges for, or reduce or eliminate benefits available to, or
restrict eligibility for coverage of a covered person, employer unit,
or class of certificate holders covered under the policy or contract
for hospital, medical, or surgical benefits without first providing
prior notice of the action. The action shall not become effective
unless written notice was delivered by mail to the last known
address of each affected nonemployee certificate holder or
employer, or if the action does not affect all employees and
dependents of one or more employers, to the last known address
of each affected employee certificate holder, at least 60 days prior
to the effective date of the action.

(c) A health insurer that declines to offer coverage to or denies
enrollment for a large group applying for coverage shall, at the
time of the denial of coverage, provide the applicant with the
specific reason or reasons for the decision in writing, in clear,
easily understandable language.

(d) (1) Notwithstanding paragraph (3) of subdivision (b) of
Section 10753.05, if the department determines that a rate is
unreasonable or not justified consistent with Article 4.5
(commencing with Section 10181), the insurer shall notify the
policyholder of this determination and shall offer the policyholder
coverage of no less than 60 days in order for the policyholder to
obtain coverage from this health insurer or another health insurer.

begin delete During the 60-day period, the prior rate shall remain in effect to
allow the purchaser the opportunity to obtain other coverage,
including coverage from another health insurer. end delete

(2) The notification to the policyholder shall state the following
in 14-point type:

“The Department of Insurance has determined that the rate for
this product is not reasonable or not justified. All health coverage
offered to employers like you is reviewed to determine whether
the rates are reasonable and justified. For the next 60 days from
the date of this notice you have the option to obtain other coverage
from this health insurer or another health insurer. begin delete During this
60-day period, the prior rate shall remain in effect. end delete For small
business purchasers, you may contact Covered California at
www.coveredca.com for help in obtaining coverage.”

begin insert

(3) The insurer may include in the notification to the
policyholder the Internet Web site address at which the insurer’s
final justification for implementing an increase that has been
determined to be unreasonable by the commissioner may be found
pursuant to Section 154.230 of Title 45 of the Code of Federal
Regulations.

end insert begin delete

(3)

end delete

begin insert ( end insert begin insert 4) end insert  The notice shall also be provided to the agent of record for
the policyholder, if any, so that the agent may assist the purchaser
in finding other coverage.

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.