BILL NUMBER: AB 1921 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 10, 2012
INTRODUCED BY Assembly Member Hill
FEBRUARY 22, 2012
An act to add and repeal Article 4.4 (commencing with Section
1366.10) of Chapter 2.2 of Division 2 of the Health and Safety Code,
and to add and repeal Chapter 8.3 (commencing with Section 10760) of
Part 2 of Division 2 of the Insurance Code, relating to health care
coverage.
LEGISLATIVE COUNSEL'S DIGEST
AB 1921, as amended, Hill. Health insurance: transitional
reinsurance program.
Existing law provides for licensing and regulation of health care
service plans by the Department of Managed Health Care. A willful
violation of provisions governing health care service plans is a
crime. Existing law provides for licensing and regulation of health
insurers by the Insurance Commissioner. Existing federal law, the
Patient Protection and Affordable Care Act, provides for
implementation of certain reforms relative to health care coverage.
This bill, until January 1, 2018, would establish a transitional
reinsurance program for health plans, and require participation by
health care service plans and health insurers. The bill would require
the Insurance Commissioner to select a reinsurance entity, which
would collect payments from contributing health plans and the
United States Department of Health and Human Services on behalf of
self-insured group plans and pay claims, as specified. The bill
would authorize the commissioner and the Director of Managed Health
Care to take various actions to implement the program. The bill would
require contributing entities to make payments to the reinsurance
entity no earlier than October 1, 2013, and would provide for the
reinsurance entity to pay claims to a reinsurance-eligible recipient
no earlier than January 1, 2014, with payments and claims to cease on
December 31, 2016, except for necessary adjustments. Because a
willful violation of the bill's provisions with respect to health
care service plans would be 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.
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. Article 4.4 (commencing with Section 1366.10) is added
to Chapter 2.2 of Division 2 of the Health and Safety Code, to read:
Article 4.4. Reinsurance
1366.10. For purposes of this article, the following terms have
the following meanings:
(a) "Applicable reinsurance entity" means a nonprofit entity that
carries out the duties as described in Section 10760.5 of the
Insurance Code.
(b) "Attachment point" means the threshold dollar amount of costs
incurred by a contributing entity for payment of essential
health benefits , provided to an
enrolled individual, after which threshold the costs for
covered essential health benefits are eligible for
reinsurance payments.
(c) "Benefit year" means a calendar year for which a health plan
provides coverage for health benefits.
(d) "California-specific reinsurance benefit and payment
parameters" means any notice issued by the director describing
procedures for collecting funds from contributing entities and making
payments to reinsurance-eligible recipients.
(e) "Coinsurance rate" means the rate at which the applicable
reinsurance entity will reimburse the reinsurance-eligible recipient
for costs incurred to cover essential health benefits, upon reaching
the attachment point and before reaching the reinsurance rate.
Coinsurance rate may be further defined by any federal or
California-specific benefits and payment parameters or regulation.
(f) "Contributing entity" means the following: an entity licensed
as a health care service plan by the department; or in the
case of a self-insured group health plan covering residents of
California, the third-party administrator of the group health plan
however, no contributing entity shall have to make
contributions on behalf of plans that consists solely of excepted
benefits, as defined in the federal Public Health Service Act (42
U.S.C. Sec. 300gg-91(c)) .
(g) "Covered individual claim" means a properly documented claim
submitted by a reinsurance-eligible recipient for a reinsurance
payment from the transitional reinsurance program.
(h) "Federal reinsurance benefits and payment parameters" means a
notice issued by the Secretary of the United States Department of
Health and Human Services describing procedures for collecting funds
from contributing entities and making payments to eligible
reinsurance recipients.
(i) "Grandfathered health plan" shall have the meaning set forth
in Section 1251 of the PPACA.
(j) "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
subsequent rules or regulations issued pursuant to that law.
(k) "Reinsurance cap" means the threshold dollar amount for costs
incurred by a reinsurance-eligible recipient for payment of
California essential health benefits for an enrolled individual,
after which threshold the costs for covered essential benefits are no
longer eligible for reinsurance payments. Reinsurance cap may be
further defined by any federal or California-specific benefits and
payment parameters or regulation.
(l) "Reinsurance contribution payment" means the required payment
by any contributing entity to the applicable reinsurance entity, as
further defined by regulation.
(m) "Reinsurance contribution year" means the 12-month period for
purposes of assessing contribution payments from contributing
entities, as further defined by regulation.
(n) "Reinsurance-eligible recipient" means, for purposes of the
transitional reinsurance program, the issuer of any health plan
or health insurance coverage offered in the California
individual market that is not a grandfathered plan.
(o) "State high-risk pool" means health insurance programs for
Californians unable to obtain coverage in the individual health
insurance market because of their preexisting conditions. State
high-risk pool specifically refers to either or both the California
Pre-Existing Condition Insurance Plan (PCIP) and the Managed Risk
Medical Insurance Program (MRMIP) both operated by the Managed Risk
Medical Insurance Board.
(p) "Third-party administrator" means the claims-processing entity
for a self-insurer. In the case of a self-insurer that processes its
own claims, the self-insurer itself will be considered the
third-party administrator for the purpose of the transitional
reinsurance program.
1366.11. The director and the Insurance Commissioner may jointly
modify the federal reinsurance benefits and payment parameters by
issuing a California-specific notice of benefits and payment
parameters by March 15 1 of the year
prior to the benefit year.
The notice shall contain at least both of the following:
(a) The data requirements and data collection frequency for
reinsurance-eligible recipients.
(b) The reinsurance attachment point, reinsurance cap, and
coinsurance rate, if different from the corresponding parameters
specified in the federal notice of benefit and payment parameters.
The director's notice 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).
1366.12. (a) A contributing entity that is licensed by the
department shall be required to do all of the following:
(1) Make payments to the applicable reinsurance entity according
to the procedures established by the PPACA or state regulations.
(2) Comply with all reasonable requests of the applicable
reinsurance entity or the director for appropriate documentation to
establish earned premium for the reinsurance contribution period.
(3) Comply with any additional requirements as established by
state or federal regulations.
(b) A reinsurance-eligible recipient that is licensed by the
department shall do all of the following:
(1) Submit documentation on covered individual claims to the
applicable reinsurance entity in a format as established by any
federal benefit or payment parameters or any California-specific
benefit and payments parameters.
(2) Remit to the applicable reinsurance entity any payments of
reinsurance benefits deemed to be overpayments following an audit or
reconciliation of collections and payments.
(3) Comply with any additional requirements as established by the
PPACA, state regulations or any California-specific reinsurance
benefit and payment parameters.
1366.13. The director may issue orders to a contributing entity
licensed by the department whenever the director determines that it
is reasonably necessary to ensure compliance with Section 1366.12. A
licensee to which an order pursuant to this section is issued may,
within 15 days of receipt of that order, request a hearing at which
the licensee may challenge the order.
1366.14. (a) This article shall be effective on January 1, 2013,
for purposes of selecting an applicable reinsurance entity and
adopting regulations, including emergency regulations to implement
the transitional reinsurance program; however, no contributing entity
shall be required to remit any payment to the applicable reinsurance
entity before October 1, 2013, and no payment to a
reinsurance-eligible recipient shall occur before January 1, 2014.
(b) The applicable reinsurance entity shall cease requiring
collections from contributing entities and making payments to
reinsurance-eligible recipients after December 31, 2016, except to
require adjustments relating to any final reconciliation of
collections and payments. The transitional reinsurance program shall
terminate on January 1, 2018.
(c) The director may adopt regulations in accordance with the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code) to
implement this article. The department shall consult with the
Insurance Commissioner in adopting necessary regulations. For
purposes of Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code, including Section
11349.6 of the Government Code, the adoption or amendment of the
regulations required to be adopted pursuant to this article is an
emergency and shall be considered by the Office of Administrative Law
as necessary for the immediate preservation of the public peace,
health and safety, and general welfare.
1366.15. This article shall remain in effect only until January
1, 2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
SEC. 2. Chapter 8.3 (commencing with Section 10760) is added to
Part 2 of Division 2 of the Insurance Code, to read:
CHAPTER 8.3. REINSURANCE
10760. For purposes of this chapter, the following terms have the
following meanings:
(a) "Applicable reinsurance entity" means a nonprofit entity that
carries out the duties as described in Section 10760.5.
(b) "Attachment point" means the threshold dollar amount of costs
incurred by a contributing entity for payment of essential
health benefits , provided to an
enrolled individual, after which threshold the
costs for covered essential health benefits are
eligible for reinsurance payments.
(c) "Benefit year" means a calendar year for which a health plan
provides coverage for health benefits.
(d) "California-specific reinsurance benefit and payment
parameters" means any notice issued by the commissioner describing
procedures for collecting funds from contributing entities and making
payments to reinsurance-eligible recipients.
(e) "Coinsurance rate" means the rate at which the applicable
reinsurance entity will reimburse the reinsurance-eligible recipient
for costs incurred to cover essential health benefits, upon reaching
the attachment point and before reaching the reinsurance rate.
Coinsurance rate may be further defined by any federal or
California-specific benefits and payment parameters or regulation.
(f) "Contributing entity" means the following: an entity
insurer licensed as a health care
service plan by the commissioner ; or in the case
of a self-insured group health plan covering residents of California,
the third-party administrator of the group health plan
to offer individual or group disability coverage providing
hospital, medical, or surgical benefits within the meaning of
subdivision (b) of Section 106; however, no contributing entity shall
have to make contributions with respect to any insurance coverage
that consists solely of excepted benefits, as defined in the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-91(c)) .
(g) "Covered individual claim" means a properly documented claim
submitted by a reinsurance-eligible recipient for a reinsurance
payment from the transitional reinsurance program.
(h) "Federal reinsurance benefits and payment parameters" means a
notice issued by the Secretary of the United States Department of
Health and Human Services describing procedures for collecting funds
from contributing entities and making payments to eligible
reinsurance recipients.
(i) "Grandfathered health plan" shall have the meaning set forth
in Section 1251 of the PPACA.
(j) "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
subsequent rules or regulations issued pursuant to that law.
(k) "Reinsurance cap" means the threshold dollar amount for costs
incurred by a reinsurance-eligible recipient for payment of
California essential health benefits for an enrolled individual,
after which threshold the costs for covered essential benefits are no
longer eligible for reinsurance payments. "Reinsurance cap" may be
further defined by any federal or California-specific benefits and
payment parameters or regulation.
(l) "Reinsurance contribution payment" means the required payment
by any contributing entity to the applicable reinsurance entity, as
further defined by regulation.
(m) "Reinsurance contribution year" means the 12-month period for
purposes of assessing contribution payments from contributing
entities, as further defined by regulation.
(n) "Reinsurance-eligible recipient" means, for purposes of the
transitional reinsurance program, the issuer of any health plan
or health insurance coverage offered in the
California individual market that is not a grandfathered plan.
(o) "State high-risk pool" means health insurance programs for
Californians unable to obtain coverage in the individual health
insurance market because of their preexisting conditions. State
high-risk pool specifically refers to either or both the California
Pre-Existing Condition Insurance Plan (PCIP) and the Managed Risk
Medical Insurance Program (MRMIP) both operated by the Managed Risk
Medical Insurance Board.
(p) "Third-party administrator" means the claims-processing entity
for a self-insurer. In the case of a self-insurer that processes its
own claims, the self-insurer itself will be considered the
third-party administrator for the purpose of the transitional
reinsurance program.
10760.5. There shall be established a California Transitional
Reinsurance Program, in which contributing entities are required to
make payments to the applicable reinsurance entity, and
reinsurance-eligible recipients will receive reinsurance payments for
covered individual claims. Based upon a competitive bidding process,
the Insurance Commissioner shall select the applicable reinsurance
entity.
10761. The commissioner Insurance
Commissioner and the Director of Managed Health Care may
jointly modify the federal reinsurance benefits and payment
parameters by issuing a California-specific notice of benefits and
payment parameters by March 15 1 of the
year prior to the benefit year.
The notice shall contain at least both of the following:
(a) The data requirements and data collection frequency for
reinsurance-eligible recipients.
(b) The reinsurance attachment point, reinsurance cap, and
coinsurance rate, if different from the corresponding parameters
specified in the federal notice of benefit and payment parameters.
The commissioner's notice 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).
10761.5. The applicable reinsurance entity selected pursuant to
the procedures in Section 10760.5 shall have all of the following
duties:
(a) Collect reinsurance contributions from contributing entities
and from the United States Department of Health and Human
Services on behalf of self-insured group plans .
(b) Remit a portion of payments collected from contributing
entities to the United States Treasury as further defined by the
PPACA.
(c) Receive and maintain required claims data on all covered
individual claims submitted by reinsurance-eligible recipients.
(d) Accept and validate requests for reinsurance payments from
reinsurance-eligible recipients.
(e) Remit reinsurance payments to reinsurance-eligible recipients.
(f) Reconcile and verify reinsurance contributions and payments
and resolve any discrepancy with any contributing entity or
reinsurance-eligible recipient.
(g) Report to the commissioner any dispute it is unable to resolve
with a contributing entity or reinsurance-eligible recipient.
(h) Maintain a complete accounting of collections from
contributing entities, payments to reinsurance-eligible recipients
and its own administrative expenses, and make timely reports of the
accounting to the commissioner and the Director of the Department of
Managed Health Care in a format and on a schedule to be established
by regulation.
(i) Coordinate reinsurance program with state high-risk pools to
the extent necessary as may be required by state or federal law.
(j) Any other duties as further defined by the PPACA, state
regulations, or any California-specific reinsurance and benefit
payment parameters.
10761.7. Records relating to claims data, reinsurance
contributions and payments, remittances to the United States
Treasury, and those pertaining to the administrative expenses of the
applicable reinsurance entity shall be maintained by the applicable
reinsurance entity for a period of 10 years following the termination
of the last applicable benefit year of the transitional reinsurance
program, as further defined by the PPACA or state regulations. Those
records shall be available to the Commissioner and the Director of
the Department of Managed Health Care for inspection. The applicable
reinsurance entity shall adhere at all times to the confidentiality
requirements in the maintenance of those records as established in
the federal Health Insurance Portability and Accountability Act of
1996 (HIPAA) and the Confidentiality of Medical Information Act (Part
2.6 (commencing with Section 56) of Division 1 of the Civil Code).
10762. (a) A contributing entity that is licensed by the
commissioner shall be required to do all of the following:
(1) Make payments to the applicable reinsurance entity according
to the procedures established by the PPACA or state regulations.
(2) Comply with all reasonable requests of the applicable
reinsurance entity or the commissioner for appropriate documentation
to establish earned premium for the reinsurance contribution period.
(3) Comply with any additional requirements as established by
state or federal regulations.
(b) A reinsurance-eligible recipient that is licensed by the
commissioner shall do all of the following:
(1) Submit documentation on covered individual claims to the
applicable reinsurance entity in a format as established by any
federal benefit or payment parameters or any California-specific
benefit and payments parameters.
(2) Remit to the applicable reinsurance entity any payments of
reinsurance benefits deemed to be overpayments following an audit or
reconciliation of collections and payments.
(3) Comply with any additional requirements as established by the
PPACA, state regulations, or any California-specific reinsurance
benefit and payment parameters.
10763. The commissioner may issue orders to a contributing entity
that is a health insurer regulated by this code whenever the
commissioner determines that it is reasonably necessary to ensure
compliance with Section 10762. A health insurer to which an order
pursuant to this section is issued may, within 15 days of receipt of
that order, request a hearing at which the licensee may challenge the
order.
10764. (a) This chapter shall be effective on January 1, 2013,
for purposes of selecting an applicable reinsurance entity and
adopting regulations, including emergency regulations to implement
the transitional reinsurance program; however, no contributing entity
shall be required to remit any payment to the applicable reinsurance
entity before October 1, 2013, and no payment to a
reinsurance-eligible recipient shall occur before January 1, 2014.
(b) The applicable reinsurance entity shall cease requiring
collections from contributing entities and making payments to
reinsurance-eligible recipients after December 31, 2016, except to
require adjustments relating to any final reconciliation of
collections, and payments. The transitional reinsurance program shall
fully terminate on January 1, 2018.
(c) The commissioner may adopt regulations in accordance with the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code) to
implement this chapter. The commissioner shall consult with the
Department of Managed Health Care in adopting necessary regulations.
For purposes of Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code, including Section
11349.6 of the Government Code, the adoption or amendment of the
regulations required to be adopted pursuant to this chapter is an
emergency and shall be considered by the Office of Administrative Law
as necessary for the immediate preservation of the public peace,
health and safety, and general welfare.
10765. This chapter shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
SEC. 3. 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.