BILL NUMBER: AB 1266 CHAPTERED BILL TEXT CHAPTER 535 FILED WITH SECRETARY OF STATE OCTOBER 4, 1995 APPROVED BY GOVERNOR OCTOBER 4, 1995 PASSED THE SENATE SEPTEMBER 15, 1995 PASSED THE ASSEMBLY SEPTEMBER 15, 1995 AMENDED IN SENATE AUGUST 30, 1995 AMENDED IN SENATE JUNE 13, 1995 AMENDED IN ASSEMBLY APRIL 17, 1995 INTRODUCED BY Assembly Member Goldsmith FEBRUARY 23, 1995 An act to amend Section 1363 of the Health and Safety Code, and to amend Sections 10603 and 10604 of the Insurance Code, relating to health coverage. LEGISLATIVE COUNSEL'S DIGEST AB 1266, Goldsmith. Health coverage: required disclosures. 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 Commissioner of Corporations. Under existing law, willful violation of the act is a misdemeanor. Existing law requires the commissioner to require the use by plans of certain disclosure forms containing specified information. This bill would add additional information required to be disclosed by plans. Existing law provides for the regulation of disability insurance policies by the Department of Insurance and requires disclosure forms for disability insurance policies to contain certain information. This bill would require the disclosure forms to also contain a summary of the process used to authorize or deny payments for services under the coverage provided by the policy. By changing the definition of a crime, this bill would impose a state-mandated local program. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 1363 of the Health and Safety Code is amended to read: 1363. (a) The commissioner shall require the use by each plan of disclosure forms or materials containing information regarding the benefits, services, and terms of the plan contract as the commissioner may require, so as to afford the public, subscribers, and enrollees with a full and fair disclosure of the provisions of the plan in readily understood language and in a clearly organized manner. The commissioner may require that the materials be presented in a reasonably uniform manner so as to facilitate comparisons between plan contracts of the same or other types of plans. Nothing contained in this chapter shall preclude the commissioner from permitting the disclosure form to be included with the evidence of coverage or plan contract. The disclosure form shall provide for at least the following information, in concise and specific terms, relative to the plan, together with additional information as may be required by the commissioner, in connection with the plan or plan contract: (1) The principal benefits and coverage of the plan. (2) The exceptions, reductions, and limitations that apply to the plan. (3) The full premium cost of the plan. (4) Any copayment, coinsurance, or deductible requirements that may be incurred by the member or the member's family in obtaining coverage under the plan. (5) The terms under which the plan may be renewed by the plan member, including any reservation by the plan of any right to change premiums. (6) A statement that the disclosure form is a summary only, and that the plan contract itself should be consulted to determine governing contractual provisions. (7) A statement as to when benefits shall cease in the event of nonpayment of the prepaid or periodic charge and the effect of nonpayment upon an enrollee who is hospitalized or undergoing treatment for an ongoing condition. (8) To the extent that the plan permits a free choice of provider to its subscribers and enrollees, the statement shall disclose the nature and extent of choice permitted and the financial liability which is, or may be, incurred by the subscriber, enrollee, or a third party by reason of the exercise of that choice. (9) A summary of the provisions required by subdivision (g) of Section 1373, if applicable. (10) If the plan utilizes arbitration to settle disputes, a statement of that fact. (11) A summary of, and a notice of the availability of, the process the plan uses to authorize or deny health care services under the benefits provided by the plan, pursuant to Section 1363.5. (12) A description of any limitations on the patient's choice of primary care or specialty care physician based on service area. (13) General authorization requirements for referral by a primary care physician to a specialty care physician. (14) Conditions and procedures for disenrollment. (b) All plans, solicitors, and representatives of a plan shall, when presenting any plan contract for examination or sale to an individual prospective plan member, provide the individual with a properly completed disclosure form, as prescribed by the commissioner pursuant to this section for each plan so examined or sold. (c) In the case of group contracts, the completed disclosure form and evidence of coverage shall be presented to the contractholder upon delivery of the completed health care service plan agreement. (d) Group contractholders shall disseminate copies of the completed disclosure form to all persons eligible to be a subscriber under the group contract at the time those persons are offered the plan. Where the individual group members are offered a choice of plans, separate disclosure forms shall be supplied for each plan available. Each group contractholder shall also disseminate or cause to be disseminated copies of the evidence of coverage to all subscribers enrolled under the group contract. (e) In the case of conflicts between the group contract and the evidence of coverage, the provisions of the evidence of coverage shall be binding upon the plan notwithstanding any provisions in the group contract which may be less favorable to subscribers or enrollees. (f) In addition to the other disclosures required by this section, every health care service plan and any agent or employee of the plan shall, when presenting a plan for examination or sale to any individual purchaser or the representative of a group consisting of 25 or fewer individuals, disclose in writing the ratio of premium costs to health services paid for plan contracts with individuals and with groups of the same or similar size for the plan's preceding fiscal year. A plan may report that information by geographic area, provided the plan identifies the geographic area and reports information applicable to that geographic area. SEC. 2. Section 10603 of the Insurance Code is amended to read: 10603. (a) On or before April 1, 1975, the commissioner shall promulgate a standard supplemental disclosure form for all disability insurance policies. Upon the appropriate disclosure form as prescribed by the commissioner, each insurer shall provide, in easily understood language and in a uniform, clearly organized manner, as prescribed and required by the commissioner, such summary information about each such policy offered by such insurer as the commissioner finds is necessary to provide for full and fair disclosure of the provisions of their policies. (b) Nothing contained in this section shall preclude the disclosure form from being included with the evidence of coverage or certificate of coverage or policy. SEC. 3. Section 10604 of the Insurance Code is amended to read: 10604. The disclosure form shall include the following information, in concise and specific terms, relative to the disability insurance policy: (a) The applicable category or categories of coverage provided by the policy, from among the following: (1) Basic hospital expense coverage. (2) Basic medical-surgical expense coverage. (3) Hospital confinement indemnity coverage. (4) Major medical expense coverage. (5) Disability income protection coverage. (6) Accident only coverage. (7) Specified disease or specified accident coverage. (8) Such other categories as the commissioner may prescribe. (b) The principal benefits and coverage of the disability insurance policy. (c) The exceptions, reductions, and limitations that apply to such policy. (d) A summary, including a citation of the relevant contractual provisions, of the process used to authorize or deny payments for services under the coverage provided by the policy. This subdivision shall only apply to policies of disability insurance that cover hospital, medical, or surgical expenses. (e) The full premium cost of such policy. (f) Any copayment, coinsurance, or deductible requirements that may be incurred by the insured or his family in obtaining coverage under the policy. (g) The terms under which the policy may be renewed by the insured, including any reservation by the insurer of any right to change premiums. (h) A statement that the disclosure form is a summary only, and that the policy itself should be consulted to determine governing contractual provisions. SEC. 4. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB 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 XIIIB of the California Constitution. Notwithstanding Section 17580 of the Government Code, unless otherwise specified, the provisions of this act shall become operative on the same date that the act takes effect pursuant to the California Constitution.