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AB-2499 Health care coverage: medical loss ratios.(2017-2018)

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Date Published: 06/18/2018 02:00 PM
AB2499:v96#DOCUMENT

Amended  IN  Senate  June 18, 2018
Amended  IN  Senate  June 07, 2018
Amended  IN  Assembly  April 17, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 2499


Introduced by Assembly Member Arambula
(Coauthor: Assembly Member Wood)

February 14, 2018


An act to amend Section 1367.003 of the Health and Safety Code, and to amend Section 10112.25 of the Insurance Code, relating to health care coverage.


LEGISLATIVE COUNSEL'S DIGEST


AB 2499, as amended, Arambula. Health care coverage: medical loss ratios.
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 the act a crime. Existing law provides for the regulation of health insurers by the Department of Insurance.
Existing law requires a health care service plan or health insurer that issues, sells, renews, or offers a health care service plan contract or health insurance policy, respectively, for health care coverage in this state to comply with minimum medical loss ratios, and to provide an annual rebate to each enrollee or insured under that coverage, on a pro rata basis, if the medical loss ratio of the amount of premium revenue expended by the plan or health insurer on the costs for reimbursement for clinical services and for activities that improve health care quality to the total amount of premium revenue is less than a certain percentage.
Existing law requires the adoption of emergency regulations, pursuant to consultation between the departments, to implement those provisions. Existing law requires the medical loss ratio provisions to be implemented to the extent required by federal law and to comply with, and not exceed, the scope of specified federal laws, rules, and regulations.
This bill would repeal the emergency regulation and consultation requirements. The bill would revise the requirements relating to the specified federal provisions, to require instead that the medical loss ratio provisions be consistent with those federal provisions as in effect on January 1, 2017. The bill would delete certain obsolete provisions and would make other technical, nonsubstantive changes.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 1367.003 of the Health and Safety Code is amended to read:

1367.003.
 (a) A health care service plan that issues, sells, renews, or offers health care service plan contracts for health care coverage in this state, including a grandfathered health plan, but not including specialized health care service plan contracts, shall provide an annual rebate to each enrollee under that coverage, on a pro rata basis, if the ratio of the amount of premium revenue expended by the health care service plan on the costs for reimbursement for clinical services provided to enrollees under that coverage and for activities that improve health care quality to the total amount of premium revenue, excluding federal and state taxes and licensing or regulatory fees and after accounting for payments or receipts for risk adjustment, risk corridors, and reinsurance, is less than the following:
(1) With respect to a health care service plan offering coverage in the large group market, 85 percent.
(2) With respect to a health care service plan offering coverage in the small group market or in the individual market, 80 percent.
(b) A health care service plan that issues, sells, renews, or offers health care service plan contracts for health care coverage in this state, including a grandfathered health plan, shall comply with the following minimum medical loss ratios:
(1) With respect to a health care service plan offering coverage in the large group market, 85 percent.
(2) With respect to a health care service plan offering coverage in the small group market or in the individual market, 80 percent.
(c) (1) The total amount of an annual rebate required under this section shall be calculated in an amount equal to the product of the following:
(A) The amount by which the percentage described in paragraph (1) or (2) of subdivision (a) exceeds the ratio described in paragraph (1) or (2) of subdivision (a).
(B) The total amount of premium revenue, excluding federal and state taxes and licensing or regulatory fees and after accounting for payments or receipts for risk adjustment, risk corridors, and reinsurance.
(2) A health care service plan shall provide a rebate owing to an enrollee no later than August 1 of the calendar year following the year for which the ratio described in subdivision (a) was calculated.
(d) 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) that are necessary to implement the medical loss ratio as described under Section 2718 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-18), and any federal rules or regulations issued under that section.
(e) This The requirements of this section shall be consistent with implemented as described in Section 2791 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-91) and the requirements of Section 2718 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-18) and any rules or regulations issued under those sections as in effect on January 1, 2017.
(f) This section does not apply to provisions of this chapter pertaining to financial statements, assets, liabilities, and other accounting items to which subdivision (s) of Section 1345 applies.
(g) This section does not apply to a health care service plan contract or insurance policy issued, sold, renewed, or offered for health care services or coverage provided in the Medi-Cal program (Chapter 7 (commencing with Section 14000) of Part 3 of Division 9 of the Welfare and Institutions Code).

SEC. 2.

 Section 10112.25 of the Insurance Code is amended to read:

10112.25.
 (a) A health insurer that issues, sells, renews, or offers health insurance policies for health care coverage in this state, including a grandfathered health plan, but not including specialized health insurance policies, shall provide an annual rebate to each insured under that coverage, on a pro rata basis, if the ratio of the amount of premium revenue expended by the health insurer on the costs for reimbursement for clinical services provided to insureds under that coverage and for activities that improve health care quality to the total amount of premium revenue, excluding federal and state taxes and licensing or regulatory fees and after accounting for payments or receipts for risk adjustment, risk corridors, and reinsurance, is less than the following:
(1) With respect to a health insurer offering coverage in the large group market, 85 percent.
(2) With respect to a health insurer offering coverage in the small group market or in the individual market, 80 percent.
(b) A health insurer that issues, sells, renews, or offers health insurance policies for health care coverage in this state, including a grandfathered health plan, shall comply with the following minimum medical loss ratios:
(1) With respect to a health insurer offering coverage in the large group market, 85 percent.
(2) With respect to a health insurer offering coverage in the small group market or in the individual market, 80 percent.
(c) (1) The total amount of an annual rebate required under this section shall be calculated in an amount equal to the product of the following:
(A) The amount by which the percentage described in paragraph (1) or (2) of subdivision (a) exceeds the ratio described in paragraph (1) or (2) of subdivision (a).
(B) The total amount of premium revenue, excluding federal and state taxes and licensing or regulatory fees and after accounting for payments or receipts for risk adjustment, risk corridors, and reinsurance.
(2) A health insurer shall provide a rebate owing to an insured no later than August 1 of the calendar year following the year for which the ratio described in subdivision (a) was calculated.
(d) 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) that are necessary to implement the medical loss ratio as described under Section 2718 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-18), and any federal rules or regulations issued under that section.
(e) This The requirements of this section shall be consistent with implemented as described in Section 2791 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-91) and the requirements of Section 2718 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-18) and any rules or regulations issued under those sections as in effect on January 1, 2017.
(f) This section does not apply to a health care service plan contract or insurance policy issued, sold, renewed, or offered for health care services or coverage provided in the Medi-Cal program (Chapter 7 (commencing with Section 14000) of Part 3 of Division 9 of the Welfare and Institutions Code).