BILL NUMBER: AB 1846 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 1, 2012
AMENDED IN ASSEMBLY MARCH 29, 2012
INTRODUCED BY Assembly Member Gordon
FEBRUARY 22, 2012
An act to add Chapter 9.8 (commencing with Section 10961) to Part
2 of Division 2 of the Insurance Code, relating to health care
coverage.
LEGISLATIVE COUNSEL'S DIGEST
AB 1846, as amended, Gordon. Consumer operated and oriented plans.
Existing law, the federal Patient Protection and Affordable Care
Act (PPACA), requires the Secretary of the United States Department
of Health and Human Services to establish the Consumer Operated and
Oriented Plan program for the purpose of fostering the creation of
qualified nonprofit health insurance issuers to offer qualified
health plans in the individual and small group markets in the states
in which they are licensed to offer those plans. Existing law
provides for the regulation of various forms of insurance by the
Insurance Commissioner and requires insurers to obtain a certificate
of authority from the commissioner in order to be admitted to
transact insurance business in the state.
This bill would authorize the commissioner to issue a certificate
of authority to a consumer operated and oriented plan (CO-OP)
established consistent with PPACA, as specified. The bill would
specify that a CO-OP issued a certificate of authority is subject to
all other provisions of law relating to insurance and would further
specify that a CO-OP insurer and any solvency loan obtained by the
CO-OP from the federal Centers for Medicare and Medicaid Services are
subject to certain requirements imposed on mutual insurers. The bill
would authorize the commissioner to request documentation relating
to a CO-OP's solvency or start-up loan. The bill would prohibit a
CO-OP from converting or selling to a for-profit or
nonconsumer-operated entity after receiving a solvency loan, would
prohibit a CO-OP from implementing a governance structure that does
not meet PPACA standards, and would authorize the commissioner to
revoke a CO-OP insurer's certificate of authority for violating those
prohibitions. The bill would authorize the Department of Insurance
to enact regulations implementing these provisions and would enact
other related provisions.
The bill would also declare the intent of the Legislature in this
regard.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. (a) It is the
intent of the Legislature in enacting this act to ensure all of the
following:
(1) That all insureds in a consumer operated and oriented plan
(CO-OP) be afforded the numerous consumer protections available to
all other individuals covered by health insurance.
(2) That a CO-OP operated in California be subject to all state
requirements applicable to health insurers, including, but not
limited to, the requirements of certificates of authority, state
reserves, risk-based capital, and financial statements filings.
(3) That before a CO-OP may offer a qualified health plan through
the California Health Benefit Exchange, that CO-OP must adhere to
California-specific standards established by the California Health
Benefit Exchange.
(4) That a CO-OP be subject to the California Health Benefit
Exchange's selective contracting requirements, including rate
negotiations.
(b) The Legislature intends and declares that a CO-OP must comply
with the same state and federal standards as other health insurers.
SECTION 1. SEC. 2. Chapter 9.8
(commencing with Section 10961) is added to Part 2 of Division 2 of
the Insurance Code, to read:
CHAPTER 9.8. CONSUMER OPERATED AND ORIENTED PLANS
10961. (a) "Consumer operated and oriented plan" means a
nonprofit member organization or nonprofit member corporation that
has been established consistent with the requirements of Section 1322
of PPACA and Subpart F (commencing with Section 156.500) of Part 156
of Subchapter B of Subtitle A of Title 45 of the Code of Federal
Regulations and remains in full compliance with those requirements. A
consumer operated and oriented plan shall also be known as a "CO-OP."
(b) "PPACA" means the federal Patient Protection and Affordable
Care Act (Public Law 111-148), as amended by the Health Care and
Education Reconciliation Act of 2010 (Public Law 111-152), and any
rules or regulations issued thereunder.
(c) "Nonprofit member organization" or "nonprofit member
corporation" means a nonprofit public benefit corporation organized
under Part 2 (commencing with Section 5110) of Division 2 of Title 1
of the Corporations Code, a nonprofit mutual benefit corporation
organized under Part 3 (commencing with Section 7110) of Division 2
of Title 1 of the Corporations Code, or a similar entity organized
under applicable provisions of the Corporations Code, or in the case
of a foreign corporation, a nonprofit public benefit corporation, a
mutual benefit corporation, or a similar entity organized under
nonprofit laws in a state other than California.
(d) "Solvency loan" means a loan provided by the federal Centers
for Medicare and Medicaid Services to a nonprofit member organization
or nonprofit member corporation seeking to become licensed as a
CO-OP insurer, to be used to assist in meeting the state's solvency
and reserve requirements.
(e) "Start-up loan" means a loan provided by the federal Centers
for Medicare and Medicaid Services to a nonprofit member organization
or nonprofit member corporation seeking to become licensed as a
CO-OP insurer, to be used for allowed expenses associated with
establishing a CO-OP, as further specified by PPACA.
10961.1. The commissioner shall have the authority to issue a
certificate of authority to a CO-OP that has been organized as a
nonprofit member organization or nonprofit member corporation under
the laws of this state. The commissioner may also issue a certificate
of authority to a foreign CO-OP that has been organized as a
nonprofit member organization or nonprofit member corporation under
the laws of another state, provided that the entity meets the
requirements governing CO-OPs under PPACA and this chapter. A CO-OP
seeking or maintaining a certificate of authority pursuant to this
chapter shall be subject to the same fees that are imposed on mutual
insurers.
10961.2. A domestic or foreign insurer admitted as a CO-OP
insurer shall be subject to the same "paid-in capital" or "capital
paid-in" requirements as are imposed on domestic and foreign mutual
insurers pursuant to Sections 36 and 4011.
10961.3. A domestic or foreign insurer admitted as a CO-OP
insurer shall be subject to all of the provisions of this code and
all applicable rules and regulations of the commissioner, including,
but not limited to, the general provisions governing issuance of a
certificate of authority in Article 3 (commencing with Section 699)
of, the examination provisions in Article 4 (commencing with Section
729) of, the risk-based capital requirements in Article 4.1
(commencing with Section 739) of, and the financial statement filing
requirements in Article 10 (commencing with Section 900) of, Chapter
1 of Part 2 of Division 1. The provisions of this code and the rules
and regulations of the commissioner shall be construed in
consideration of the fundamental nature of a CO-OP insurer. In the
event of any direct conflict between the other provisions of this
code and the provisions of this chapter, the provisions of this
chapter shall prevail.
10961.4. (a) A solvency loan obtained by a CO-OP shall be treated
as a surplus note and shall be subject to the same requirements as
are imposed on mutual insurers pursuant to Article 4 (commencing with
Section 4040) of Chapter 4 of Part 1 of Division 2. The commissioner
may request any documentation relating to a CO-OP's start-up loan or
solvency loan.
(b) A CO-OP shall be subject to the same securities permit
requirements as are imposed upon mutual insurers pursuant to Section
4042; however, the commissioner shall have the authority to waive the
requirements under Section 4042 upon a determination that they are
not applicable following a full review of the CO-OP's plan of
operations and any other documents as requested by the commissioner
prior to the admission of the CO-OP.
10961.5. The provisions of Section 699.5 shall apply to any
insurer admitted as a CO-OP insurer; however, any loans received by
the CO-OP in the form of a solvency or start-up loan shall not be
construed as any form of subsidy, ownership, or financial control of
the CO-OP insurer within the meaning of Section 699.5.
10961.6. A CO-OP shall be subject at all times to the
prohibitions in PPACA against converting or selling to a for-profit
or nonconsumer-operated entity at any time after receiving a solvency
loan. Furthermore, a CO-OP shall not undertake any transaction that
would result in the CO-OP implementing a governance structure that
does not meet the standards contained in PPACA. Any violation of
these prohibitions shall constitute grounds for revocation of the
CO-OP insurer's certificate of authority, in addition to any other
grounds in this code for revocation of the certificate.
10961.7. A CO-OP insurer is insolvent if its surplus becomes less
than the amount of paid-in capital required of a capital stock
company to qualify to transact the class of disability and health
insurance. The conservation and liquidation provisions of Article 14
(commencing with Section 1010) of Chapter 1 of Part 2 of Division 1
shall apply to CO-OP insurers.
10961.8. In addition to any applicable requirements in this code
for maintaining a certificate of authority, a CO-OP is required at
all times to be in full compliance with the requirements of PPACA
governing CO-OPs. The commissioner may request the federal government'
s certification that a CO-OP is in compliance with the requirements
of PPACA governing CO-OPs, as well as the status of the CO-OP's
compliance with its obligations under any loan or loan modification
agreement.
10961.9. The department may adopt regulations implementing this
chapter pursuant 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).