BILL NUMBER: SB 908 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 31, 2016
AMENDED IN SENATE MARCH 29, 2016
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.
During the 60-day period the contractholder or policyholder would
continue to be covered at the prior rate. 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.
During the 60-day period, the prior rate shall remain in
effect to allow the purchaser the opportunity to obtain other
coverage.
(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.
During this 60-day period, the prior rate shall remain in effect.
For small business purchasers, you may contact Covered
California at www.coveredca.com for help in obtaining coverage."
(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.
(3)
( 4) 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 coverage.
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 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."
(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.
(4)
( 5) 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.
(5)
( 6) 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."
(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.
(4)
( 5) 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.
(5)
( 6) 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. 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.
(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. During this
60-day period, the prior rate shall remain in effect. For
small business purchasers, you may contact Covered California at
www.coveredca.com for help in obtaining coverage."
(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.
(3)
( 4) 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.