Amended in Assembly August 18, 2016

Amended in Assembly June 30, 2016

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, 1385.03, 1385.07, 1385.11, and 1389.25 of the Health and Safety Code, and to amend Sections 10113.9, 10181.3, 10181.7, 10181.11, 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.

(1) 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 small group rate is unreasonable or not justified, the contractholder or policyholder of a small group health care service plan contract or health insurance policy to be notified by the health care service plan or health insurer in writing of that determination. The bill would require the notification to be developed by the Department of Managed Health Care and the Department of Insurance, as specified.

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 begin delete 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. end delete begin insert delivered at least 15 days prior to the start end insert begin insert 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. end insert

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 begin delete 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. end delete begin insert determination. end insert The bill would require the notification to be developed by the Department of Managed Health Care and the Department of Insurance, as specified. begin delete 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. end delete begin insert The bill would instead prohibit 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 provided at least 10 days prior to the start of the annual enrollment period end insert begin insert applicable to the contract or 60 days prior to the effective date of the contract renewal, whichever occurs earlier in the calendar year. end insert

(2) Existing law requires a health care service plan or health insurer in the individual or small group market to file rate information with the Department of Managed Health Care or the Department of Insurance, as applicable, at least 60 days prior to implementing any rate change and requires that the information include a certification by an independent actuary that the rate increase is reasonable or unreasonable. Existing law authorizes the Department of Managed Health Care and the Department of Insurance to review these filings to, among other things, make a determination that an unreasonable rate increase is not justified.

This bill would instead begin delete require end delete begin insert require, for grandfathered individual and grandfathered and nongrandfathered small group health care service plan contracts or health insurance policies, end insert a health care service plan or health insurer begin delete in the individual or small group market end delete to file rate information at least 120 days prior to implementing any rate change. begin insert The bill would require, for nongrandfathered individual health care service plan contracts or health insurance policies, a health care service plan or health insurer to file rate information either 100 days before the first day of the applicable open enrollment period for the preceding policy year, as defined, or on the date specified in federal guidance issued pursuant to a specified federal regulation, whichever date is earlier. end insert The bill would require a health care service plan or health insurer to respond to any request for additional rate information necessary for the Department of Managed Health Care or the Department of Insurance to complete its review of the rate filing for products in the individual or small group market within begin delete 3 end delete begin insert 5 end insert business days of the request and would begin delete require end delete begin insert require, except as provided, end insert the Department of Managed Health Care and the Department of Insurance to review these filings and make its determination no later than 60 days following receipt of the rate information. begin insert The bill would require, for nongrandfathered individual health care service plan contracts and health insurance policies, the department to make its determination no later than the 15 days before the first day of the applicable open enrollment period for the preceding policy year, as defined, and would authorize the Department of Managed Health Care and the Department of Insurance, respectively, to determine that a plan’s or health insurer’s rate increase is unreasonable or not justified if the plan or health insurer fails to provide all the information necessary for the respective department to complete its review. end insert

begin insert

The bill would require, if the respective department determines that a plan’s or health insurer’s rate increase for an individual or small group market product is unreasonable or not justified, the health care service plan or health insurer to provide notice of that determination to any individual or small group applicant, as specified.

end insert

(3) This bill would also revise obsolete references and would make other conforming and technical, nonsubstantive changes.

(4) 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) For small group health care service plan contracts, 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. begin insert This
notification may be included in the notice required in subdivision
(a). end insert

(2) The notification to the contractholder shall be developed by
the department and shall include the following statements in
14-point type:

(A) The Department of Managed Health Care has determined
that the rate for this product is unreasonable or not justified after
reviewing information submitted to it by the plan.

(B) The contractholder has the option to obtain other coverage
from this plan or another plan, or to keep this coverage.

(C) Small business purchasers may want to contact Covered
California at www.coveredca.com for help in understanding
available options.

begin insert

(3) In developing the notification, the department shall take into
consideration that this notice is required to be provided to a small
group applicant pursuant to subdivision (g) of Section 1385.03.

end insert begin delete

(3)

end delete

begin insert (4) end insert  The development of the notification required under this
subdivision shall not be subject to the Administrative Procedure
Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code).

begin delete

(4)

end delete

begin insert (5) end insert  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.

begin delete

(5)

end delete

begin insert (6) 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 1385.03 of the Health and Safety Code is
amended to read:

1385.03.  

(a) All health care service plans shall file with the
department all required rate information for begin insert grandfathered end insert
individual and begin insert grandfathered and nongrandfathered end insert small group
health care service plan contracts at least 120 days prior to
implementing any rate change. begin insert All health care service plans shall
file with the department all required rate information for
nongrandfathered individual health care service plan contracts
on the earlier of the following dates: end insert

begin insert

(1) One hundred days before the first day of the applicable open
enrollment period described in Section 1399.849 for the preceding
policy year.

end insert begin insert

(2) The date specified in the federal guidance issued pursuant
to Section 154.220(b) of Title 45 of the Code of Federal
Regulations.

end insert

(b) A plan shall disclose to the department all of the following
for each individual and small group rate filing:

(1) Company name and contact information.

(2) Number of plan contract forms covered by the filing.

(3) Plan contract form numbers covered by the filing.

(4) Product type, such as a preferred provider organization or
health maintenance organization.

(5) Segment type.

(6) Type of plan involved, such as for profit or not for profit.

(7) Whether the products are opened or closed.

(8) Enrollment in each plan contract and rating form.

(9) Enrollee months in each plan contract form.

(10) Annual rate.

(11) Total earned premiums in each plan contract form.

(12) Total incurred claims in each plan contract form.

(13) Average rate increase initially requested.

(14) Review category: initial filing for new product, filing for
existing product, or resubmission.

(15) Average rate of increase.

(16) Effective date of rate increase.

(17) Number of subscribers or enrollees affected by each plan
contract form.

(18) The plan’s overall annual medical trend factor assumptions
in each rate filing for all benefits and by aggregate benefit category,
including hospital inpatient, hospital outpatient, physician services,
prescription drugs and other ancillary services, laboratory, and
radiology. A plan may provide aggregated additional data that
demonstrates or reasonably estimates year-to-year cost increases
in specific benefit categories in the geographic regions listed in
Sections 1357.512 and 1399.855. A health plan that exclusively
contracts with no more than two medical groups in the state to
provide or arrange for professional medical services for the
enrollees of the plan shall instead disclose the amount of its actual
trend experience for the prior contract year by aggregate benefit
category, using benefit categories that are, to the maximum extent
possible, the same or similar to those used by other plans.

(19) The amount of the projected trend attributable to the use
of services, price inflation, or fees and risk for annual plan contract
trends by aggregate benefit category, such as hospital inpatient,
hospital outpatient, physician services, prescription drugs and other
ancillary services, laboratory, and radiology. A health plan that
exclusively contracts with no more than two medical groups in the
state to provide or arrange for professional medical services for
the enrollees of the plan shall instead disclose the amount of its
actual trend experience for the prior contract year by aggregate
benefit category, using benefit categories that are, to the maximum
extent possible, the same or similar to those used by other plans.

(20) A comparison of claims cost and rate of changes over time.

(21) Any changes in enrollee cost sharing over the prior year
associated with the submitted rate filing.

(22) Any changes in enrollee benefits over the prior year
associated with the submitted rate filing.

(23) The certification described in subdivision (b) of Section
1385.06.

(24) Any changes in administrative costs.

(25) Any other information required for rate review under
PPACA.

(c) A health care service plan subject to subdivision (a) shall
also disclose the following aggregate data for all rate filings
submitted under this section in the individual and small group
health plan markets:

(1) Number and percentage of rate filings reviewed by the
following:

(A) Plan year.

(B) Segment type.

(C) Product type.

(D) Number of subscribers.

(E) Number of covered lives affected.

(2) The plan’s average rate increase by the following categories:

(A) Plan year.

(B) Segment type.

(C) Product type.

(3) Any cost containment and quality improvement efforts since
the plan’s last rate filing for the same category of health benefit
plan. To the extent possible, the plan shall describe any significant
new health care cost containment and quality improvement efforts
and provide an estimate of potential savings together with an
estimated cost or savings for the projection period.

(d) The department may require all health care service plans to
submit all rate filings to the National Association of Insurance
Commissioners’ System for Electronic Rate and Form Filing
(SERFF). Submission of the required rate filings to SERFF shall
be deemed to be filing with the department for purposes of
compliance with this section.

(e) A plan shall submit any other information required under
PPACA. A plan shall also submit any other information required
pursuant to any regulation adopted by the department to comply
with this article.

(f) (1) A plan shall respond to the department’s request for any
additional information necessary for the department to complete
its review of the plan’s rate filing for individual and small group
health care service plan contracts under this article within begin delete three end delete
begin insert five end insert business days of the department’s request or as otherwise
required by the department.

(2)  begin delete The end delete begin insert Except as provided in paragraph (3), the end insert department
shall determine whether a plan’s rate increase for individual and
small group health care service plan contracts is unreasonable or
not justified no later than 60 days following receipt of all the
information the department requires to makes its determination.

begin insert

(3) For nongrandfathered individual health care service plan
contracts, the department shall issue a determination that the
plan’s rate increase is unreasonable or not justified no later than
15 days before the first day of the applicable open enrollment
period described in Section 1399.849 for the preceding policy
year. If a health care service plan fails to provide all the
information the department requires in order for the department
to make its determination, the department may determine that a
plan’s rate increase is unreasonable or not justified.

end insert begin insert

(g) If the department determines that a plan’s rate increase for
individual or small group health care service plan contracts is
unreasonable or not justified consistent with this article, the health
care service plan shall provide notice of that determination to any
individual or small group applicant. The notice provided to an
individual applicant shall be consistent with the notice described
in subdivision (c) of Section 1389.25. The notice provided to a
small group applicant shall be consistent with the notice described
in subdivision (c) of Section 1374.21.

end insert begin insert

(h) For purposes of this section, “policy year” has the same
meaning as set forth in subdivision (g) of Section 1399.845.

end insert

SEC. 3.  

Section 1385.07 of the Health and Safety Code is
amended to read:

1385.07.  

(a) Notwithstanding Chapter 3.5 (commencing with
Section 6250) of Division 7 of Title 1 of the Government Code,
all information submitted under this article shall be made publicly
available by the department except as provided in subdivision (b).

(b) (1) The contracted rates between a health care service plan
and a provider shall be deemed confidential information that shall
not be made public by the department and are exempt from
disclosure under the California Public Records Act (Chapter 3.5
(commencing with Section 6250) of Division 7 of Title 1 of the
Government Code). The contracted rates between a health care
service plan and a provider shall not be disclosed by a health care
service plan to a large group purchaser that receives information
pursuant to Section 1385.10.

(2) The contracted rates between a health care service plan and
a large group shall be deemed confidential information that shall
not be made public by the department and are exempt from
disclosure under the California Public Records Act (Chapter 3.5
(commencing with Section 6250) of Division 7 of Title 1 of the
Government Code). Information provided to a large group
purchaser pursuant to Section 1385.10 shall be deemed confidential
information that shall not be made public by the department and
shall be exempt from disclosure under the California Public
Records Act (Chapter 3.5 (commencing with Section 6250) of
Division 7 of Title 1 of the Government Code).

(c) All information submitted to the department under this article
shall be submitted electronically in order to facilitate review by
the department and the public.

(d) In addition, the department and the health care service plan
shall, at a minimum, make the following information readily
available to the public on their Internet Web sites, in plain language
and in a manner and format specified by the department, except
as provided in subdivision (b). For individual and small group
health care service plan contracts, the information shall be made
public for 120 days prior to the implementation of the rate increase.
For large group health care service plan contracts, the information
shall be made public for 60 days prior to the implementation of
the rate increase. The information shall include:

(1) Justifications for any unreasonable rate increases, including
all information and supporting documentation as to why the rate
increase is justified.

(2) A plan’s overall annual medical trend factor assumptions in
each rate filing for all benefits.

(3) A health plan’s actual costs, by aggregate benefit category
to include hospital inpatient, hospital outpatient, physician services,
prescription drugs and other ancillary services, laboratory, and
radiology.

(4) The amount of the projected trend attributable to the use of
services, price inflation, or fees and risk for annual plan contract
trends by aggregate benefit category, such as hospital inpatient,
hospital outpatient, physician services, prescription drugs and other
ancillary services, laboratory, and radiology. A health plan that
exclusively contracts with no more than two medical groups in the
state to provide or arrange for professional medical services for
the enrollees of the plan shall instead disclose the amount of its
actual trend experience for the prior contract year by aggregate
benefit category, using benefit categories that are, to the maximum
extent possible, the same or similar to those used by other plans.

SEC. 4.  

Section 1385.11 of the Health and Safety Code is
amended to read:

1385.11.  

(a) Whenever it appears to the department that any
person has engaged, or is about to engage, in any act or practice
constituting a violation of this article, including the filing of
inaccurate or unjustified rates or inaccurate or unjustified rate
information, the department may review the rate filing to ensure
compliance with the law.

(b) The department may review other filings.

(c) The department shall accept and post to its Internet Web site
any public comment on a rate increase submitted to the department
during the applicable period described in subdivision (d) of Section
1385.07.

(d) The department shall report to the Legislature at least
quarterly on all unreasonable rate filings.

(e) The department shall post on its Internet Web site any
changes submitted by the plan to the proposed rate increase,
including any documentation submitted by the plan supporting
those changes.

(f) If the director makes a decision that an unreasonable rate
increase is not justified or that a rate filing contains inaccurate
information, the department shall post that decision on its Internet
Web site.

(g) Nothing in this article shall be construed to impair or impede
the department’s authority to administer or enforce any other
provision of this chapter.

SEC. 5.  

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
begin delete delivered end delete begin insert provided end insert a written notice of the change at least begin delete 15 end delete begin insert 10 end insert
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 begin delete delivered end delete begin insert provided end insert 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)  begin delete Notwithstanding subdivision (c) of Section 1399.849,
if end delete begin insert If end insert 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 begin delete 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. end delete begin insert determination. This notification may be included in the notice
required in subdivision (b). end insert The notification to the contractholder
shall be developed by the department. The development of the
notification required under this subdivision shall not be subject to
the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code).

(2)  begin delete If it is prior to the open enrollment period for the applicable
rate year, the end delete begin insert The end insert notification to the contractholder shall include
the following statements in 14-point type:

(A) The Department of Managed Health Care has determined
that the rate for this product is unreasonable or not justified after
reviewing information submitted to it by the plan.

(B) During the begin delete upcoming end delete open enrollment period, the
contractholder has the option to obtain other coverage from this
plan or another plan, or to keep this coverage.

(C) The contractholder may want to contact Covered California
at www.coveredca.com for help in understanding available options.

(D) Many Californians are eligible for financial assistance from
Covered California to help pay for coverage.

begin delete

(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 include the following
statements in 14-point type:

(A) The Department of Managed Health Care has determined
that the rate for this product is unreasonable or not justified after
reviewing information submitted to it by the plan.

(B) The contractholder has the option to obtain other coverage
from this plan or another plan, or to keep this coverage.

(C) The contractholder may want to contact Covered California
at www.coveredca.com for help in understanding available options.

(D) Many Californians are eligible for financial assistance from
Covered California to help pay for coverage.

(4)

end delete

begin insert (3) end insert  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.

begin delete

(5)

end delete

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.

begin delete

(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.

end delete begin insert

(5) In developing the notification, the department shall take into
consideration that this notice is required to be provided to an
individual applicant pursuant to subdivision (g) of Section 1385.03.

end insert

(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. 6.  

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 begin delete delivered end delete begin insert provided end insert a written notice of the change
at least begin delete 15 end delete begin insert 10 end insert 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 begin delete delivered end delete begin insert provided end insert 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)  begin delete Notwithstanding subdivision (c) of Section 10965.3, if end delete
begin insert If end insert 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
begin delete 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. end delete begin insert determination. This notification may be included in the
notice required in subdivision (b). end insert The notification to the
policyholder shall be developed by the department. The
development of the notification required under this subdivision
shall not be subject to the Administrative Procedure Act (Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of
Title 2 of the Government Code).

(2)  begin delete If it is prior to the open enrollment period for the applicable
rate year, the end delete begin insert The end insert notification to the policyholder shall include the
following statements in 14-point type:

(A) The Department of Insurance has determined that the rate
for this product is unreasonable or not justified after reviewing
information submitted to it by the insurer.

(B) During the begin delete upcoming end delete open enrollment period, the
policyholder has the option to obtain other coverage from this
insurer or another insurer, or to keep this coverage.

(C) The policyholder may want to contact Covered California
at www.coveredca.com for help in understanding available options.

(D) Many Californians are eligible for financial assistance from
Covered California to help pay for coverage.

begin delete

(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 include the following
statements in 14-point type:

end delete begin delete

(A) The Department of Insurance has determined that the rate
for this product is unreasonable or not justified after reviewing
information submitted to it by the insurer.

end delete begin delete

(B) The policyholder has the option to obtain other coverage
from this insurer or another insurer, or to keep this coverage.

end delete begin delete

(C) The policyholder may want to contact Covered California
at www.coveredca.com for help in understanding available options.

end delete begin delete

(D) Many Californians are eligible for financial assistance from
Covered California to help pay for coverage.

end delete begin delete

(4)

end delete

begin insert (3) end insert  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.

begin delete

(5)

end delete

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.

begin delete

(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.

end delete begin insert

(5) In developing the notification, the department shall take into
consideration that this notice is required to be provided to an
individual applicant pursuant to subdivision (g) of Section 10181.3.

end insert

(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. 7.  

Section 10181.3 of the Insurance Code is amended to
read:

10181.3.  

(a) All health insurers shall file with the department
all required rate information for begin insert grandfathered end insert individual and
begin insert grandfathered and nongrandfathered end insert small group health insurance
policies at least 120 days prior to implementing any rate change.

begin insert All health insurers shall file with the department all required rate
information for nongrandfathered individual health insurance
policies on the earlier of the following dates: end insert

begin insert

(1) One hundred days before the first day of the applicable open
enrollment period described in Section 10965.3 for the preceding
policy year.

end insert begin insert

(2) The date specified in the federal guidance issued pursuant
to Section 154.220(b) of Title 45 of the Code of Federal
Regulations.

end insert

(b) An insurer shall disclose to the department all of the
following for each individual and small group rate filing:

(1) Company name and contact information.

(2) Number of policy forms covered by the filing.

(3) Policy form numbers covered by the filing.

(4) Product type, such as indemnity or preferred provider
organization.

(5) Segment type.

(6) Type of insurer involved, such as for profit or not for profit.

(7) Whether the products are opened or closed.

(8) Enrollment in each policy and rating form.

(9) Insured months in each policy form.

(10) Annual rate.

(11) Total earned premiums in each policy form.

(12) Total incurred claims in each policy form.

(13) Average rate increase initially requested.

(14) Review category: initial filing for new product, filing for
existing product, or resubmission.

(15) Average rate of increase.

(16) Effective date of rate increase.

(17) Number of policyholders or insureds affected by each
policy form.

(18) The insurer’s overall annual medical trend factor
assumptions in each rate filing for all benefits and by aggregate
benefit category, including hospital inpatient, hospital outpatient,
physician services, prescription drugs and other ancillary services,
laboratory, and radiology. An insurer may provide aggregated
additional data that demonstrates or reasonably estimates
year-to-year cost increases in specific benefit categories in the
geographic regions listed in Sections 10753.14 and 10965.9. For
purposes of this paragraph, “major geographic region” shall be
defined by the department and shall include no more than nine
regions.

(19) The amount of the projected trend attributable to the use
of services, price inflation, or fees and risk for annual policy trends
by aggregate benefit category, such as hospital inpatient, hospital
outpatient, physician services, prescription drugs and other
ancillary services, laboratory, and radiology.

(20) A comparison of claims cost and rate of changes over time.

(21) Any changes in insured cost sharing over the prior year
associated with the submitted rate filing.

(22) Any changes in insured benefits over the prior year
associated with the submitted rate filing.

(23) The certification described in subdivision (b) of Section
10181.6.

(24) Any changes in administrative costs.

(25) Any other information required for rate review under
PPACA.

(c) An insurer subject to subdivision (a) shall also disclose the
following aggregate data for all rate filings submitted under this
section in the individual and small group health insurance markets:

(1) Number and percentage of rate filings reviewed by the
following:

(A) Plan year.

(B) Segment type.

(C) Product type.

(D) Number of policyholders.

(E) Number of covered lives affected.

(2) The insurer’s average rate increase by the following
categories:

(A) Plan year.

(B) Segment type.

(C) Product type.

(3) Any cost containment and quality improvement efforts since
the insurer’s last rate filing for the same category of health benefit
plan. To the extent possible, the insurer shall describe any
significant new health care cost containment and quality
improvement efforts and provide an estimate of potential savings
together with an estimated cost or savings for the projection period.

(d) The department may require all health insurers to submit all
rate filings to the National Association of Insurance
Commissioners’ System for Electronic Rate and Form Filing
(SERFF). Submission of the required rate filings to SERFF shall
be deemed to be filing with the department for purposes of
compliance with this section.

(e) A health insurer shall submit any other information required
under PPACA. A health insurer shall also submit any other
information required pursuant to any regulation adopted by the
department to comply with this article.

(f) (1) A health insurer shall respond to the department’s request
for any additional information necessary for the department to
complete its review of the health insurer’s rate filing for individual
and small group health insurance policies under this article within
begin delete three end delete begin insert five end insert business days of the department’s request or as otherwise
required by the department.

(2)  begin delete The end delete begin insert Except as provided in paragraph (3), the end insert department
shall determine whether a health insurer’s rate increase for
individual and small group insurance policies is unreasonable or
not justified no later than 60 days following receipt of all the
information the department requires to make its determination.

begin insert

(3) For nongrandfathered individual health insurance policies,
the department shall issue a determination that the health insurer’s
rate increase is unreasonable or not justified no later than 15 days
before the first day of the applicable open enrollment period
described in Section 10965.3 for the preceding policy year. If a
health insurer fails to provide all the information the department
requires in order for the department to make its determination,
the department may determine that a health insurer’s rate increase
is unreasonable or not justified.

end insert begin insert

(g) If the department determines that a health insurer’s rate
increase for individual or small group health insurance policies
is unreasonable or not justified consistent with this article, the
health insurer shall provide notice of that determination to any
individual or small group applicant. The notice provided to an
individual applicant shall be consistent with the notice described
in subdivision (c) of Section 10113.9. The notice provided to a
small group applicant shall be consistent with the notice described
in subdivision (d) of Section 10199.1.

end insert begin insert

(h) For purposes of this section, “policy year” has the same
meaning as set forth in subdivision (g) of Section 10965.

end insert

SEC. 8.  

Section 10181.7 of the Insurance Code is amended to
read:

10181.7.  

(a) Notwithstanding Chapter 3.5 (commencing with
Section 6250) of Division 7 of Title 1 of the Government Code,
all information submitted under this article shall be made publicly
available by the department except as provided in subdivision (b).

(b) (1) Any contracted rates between a health insurer and a
provider shall be deemed confidential information that shall not
be made public by the department and are exempt from disclosure
under the California Public Records Act (Chapter 3.5 (commencing
with Section 6250) of Division 7 of Title 1 of the Government
Code). The contracted rates between a health insurer and a provider
shall not be disclosed by a health insurer to a large group purchaser
that receives information pursuant to Section 10181.10.

(2) The contracted rates between a health insurer and a large
group shall be deemed confidential information that shall not be
made public by the department and are exempt from disclosure
under the California Public Records Act (Chapter 3.5 (commencing
with Section 6250) of Division 7 of Title 1 of the Government
Code). Information provided to a large group purchaser pursuant
to Section 10181.10 shall be deemed confidential information that
shall not be made public by the department and shall be exempt
from disclosure under the California Public Records Act (Chapter
3.5 (commencing with Section 6250) of Division 7 of Title 1 of
the Government Code).

(c) All information submitted to the department under this article
shall be submitted electronically in order to facilitate review by
the department and the public.

(d) In addition, the department and the health insurer shall, at
a minimum, make the following information readily available to
the public on their Internet Web sites, in plain language and in a
manner and format specified by the department, except as provided
in subdivision (b). For individual and small group health insurance
policies, the information shall be made public for 120 days prior
to the implementation of the rate increase. For large group health
care insurance policies, the information shall be made public for
60 days prior to the implementation of the rate increase. The
information shall include:

(1) Justifications for any unreasonable rate increases, including
all information and supporting documentation as to why the rate
increase is justified.

(2) An insurer’s overall annual medical trend factor assumptions
in each rate filing for all benefits.

(3) An insurer’s actual costs, by aggregate benefit category to
include, hospital inpatient, hospital outpatient, physician services,
prescription drugs and other ancillary services, laboratory, and
radiology.

(4) The amount of the projected trend attributable to the use of
services, price inflation, or fees and risk for annual policy trends
by aggregate benefit category, such as hospital inpatient, hospital
outpatient, physician services, prescription drugs and other
ancillary services, laboratory, and radiology.

SEC. 9.  

Section 10181.11 of the Insurance Code is amended
to read:

10181.11.  

(a) Whenever it appears to the department that any
person has engaged, or is about to engage, in any act or practice
constituting a violation of this article, including the filing of
inaccurate or unjustified rates or inaccurate or unjustified rate
information, the department may review rate filing to ensure
compliance with the law.

(b) The department may review other filings.

(c) The department shall accept and post to its Internet Web site
any public comment on a rate increase submitted to the department
during the applicable period described in subdivision (d) of Section
10181.7.

(d) The department shall report to the Legislature at least
quarterly on all unreasonable rate filings.

(e) The department shall post on its Internet Web site any
changes submitted by the insurer to the proposed rate increase,
including any documentation submitted by the insurer supporting
those changes.

(f) If the commissioner makes a decision that an unreasonable
rate increase is not justified or that a rate filing contains inaccurate
information, the department shall post that decision on its Internet
Web site.

(g) Nothing in this article shall be construed to impair or impede
the department’s authority to administer or enforce any other
provision of this code.

SEC. 10.  

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) For small group health insurance policies, 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. begin insert This
notification may be included in the notice required in subdivision
(a) or (b). end insert

(2) The notification to the policyholder shall be developed by
the department and shall include the following statements in
14-point type:

(A) The Department of Insurance has determined that the rate
for this product is unreasonable or not justified after reviewing
information submitted to it by the insurer.

(B) The policyholder has the option to obtain other coverage
from this insurer or another insurer, or to keep this coverage.

(C) Small business purchasers may want to contact Covered
California at www.coveredca.com for help in understanding
available options.

(3) The development of the notification required under this
subdivision shall not be subject to the Administrative Procedure
Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code).

(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.

(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.

begin insert

(6) In developing the notification, the department shall take into
consideration that this notice is required to be provided to a small
group applicant pursuant to subdivision (g) of Section 10181.3.

end insert

SEC. 11.  

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.