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SB-27 California Major Risk Medical Insurance Program: health care service plans: individual health care coverage.(2007-2008)

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SB27:v98#DOCUMENT

Amended  IN  Senate  August 19, 2008

CALIFORNIA LEGISLATURE— 2007–2008 1st Ext.

Senate Bill
No. 27

Introduced  by  Senator Aanestad

August 04, 2008

An act to amend Sections 1367.01, 1367.03, 1368, 1368.04, 1374.9, 1374.34, and 1393.6 1393.6, 1399.805, and 1399.811 of, to add Section 1341.45 to, and to add and repeal Section 1357.55 Sections 1356.2 and 1357.55 of, the Health and Safety Code, and to amend Sections 10901.3, 10901.9, 12725, 12727, and 12739 of, to add Sections 12715.5, 12715.6, 12721.5, and 12739.5 and 12721.5 to, to add and repeal Sections 10127.19, 10198.11, 12719, 12724, and 12737.5 of, and to add and repeal Chapter 7.5 (commencing with Section 12738.1) of Part 6.5 of Division 2 of, the Insurance Code, relating to health care coverage, and making an appropriation therefor.


LEGISLATIVE COUNSEL'S DIGEST


SB 27, as amended, Aanestad. California Major Risk Medical Insurance Program: health care service plans: individual health care coverage.

Existing

(1) Existing law establishes the California Major Risk Medical Insurance Program (MRMIP) that is administered by the Managed Risk Medical Insurance Board (MRMIB) to provide major risk medical coverage to residents, as defined, who, among other matters, have been rejected for coverage by at least one private health plan. Existing law authorizes MRMIB to provide that coverage through participating health plans, including health insurers and health care service plans, and authorizes MRMIB to provide or purchase stop-loss coverage under which MRMIP and participating health plans share the risk for health plan expenses that exceed plan rates.
This bill would require that a person either be rejected for coverage by at least 3 different health plans or have a qualified medically uninsurable condition, as specified, in order to be eligible for MRMIP and would also revise the definition of the term “resident” for purposes of MRMIP eligibility, as specified. The bill would require MRMIB to offer at least 4 different options for major risk medical coverage, including at least one health savings account-compatible option, and would state the intent of the Legislature to enact legislation allowing a related tax deduction and authorizing the state to subsidize the health savings account option, as specified. The bill would state the intent of the Legislature to enact legislation allowing MRMIB to, until a specified date, participate in deductible and out-of-pocket maximum reinsurance using specified products. The bill would also state the intent of the Legislature to enact legislation placing an assessment on health care service plans and health insurers in order to supplement available MRMIP funding and allowing offsetting tax deductions until a specified date.
Existing law specifies the minimum scope of benefits offered by participating health plans in MRMIP and requires the exclusion of benefits that exceed $75,000 in a calendar year or $750,000 in a lifetime, as specified. Existing law requires MRMIB to establish program contribution amounts for each category of risk for each participating health plan. Under existing law, the risk categories are based on age and geographic region.
This bill would, until January 1, 2014, require the exclusion of benefits that exceed $150,000 in a calendar year or $1,000,000 in a lifetime. The bill would authorize MRMIB to, by regulation, develop additional risk categories based on morbid obesity and tobacco use, as specified, and would also require MRMIB to adopt regulations that allow participating health plans to incorporate wellness programs, case management services, and disease management services, and offer enrollee rewards based on health risk reduction. The bill would require that those regulations remain in effect until January 1, 2014.

Existing

(2) Existing law, the Knox-Keene Health Care Service Plan Act of 1975 (the Knox-Keene Act), 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 Knox-Keene Act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law prohibits health care service plan contracts and health insurance policies from excluding coverage on the basis of a preexisting condition provision for more than a specified period of time.
This bill would, commencing July 1, 2009, require each health care service plan and health insurer to impose a surcharge on each person covered by an individual health plan contract or individual health insurance policy, as specified, and would require the deposit of those revenues in the Major Risk Medical Insurance Fund, a continuously appropriated fund, thereby making an appropriation. The bill would require the suspension of the assessment if state funds appropriated to MRMIP are less than a certain amount. The bill would require health care service plans and health insurers to report to the Department of Managed Health Care or the Department of Insurance, and MRMIB, the number of individuals covered by the plan’s or insurer’s individual health care service plan contracts or individual health insurance policies annually, as specified. The bill would provide for the repeal of these provisions on January 1, 2014.
Existing law prohibits health care service plan contracts and health insurance policies from excluding coverage on the basis of a preexisting condition provision for more than a specified period of time.
This bill would authorize MRMIB to create a rider pool consisting of MRMIP applicants with no more than 2 health conditions that made them uninsurable in the private market, as specified. The bill would authorize an individual health care service plan contract or individual health insurance policy issued to one of the rider pool members to temporarily or permanently exclude coverage for those conditions. The bill would provide for the repeal of these provisions on January 1, 2014.
Existing law requires a health care service plan or a health insurer offering individual plan contracts or individual insurance policies to fairly and affirmatively offer, market, and sell certain individual contracts and policies to all federally eligible defined individuals, as defined, in each service area in which the plan or insurer provides or arranges for the provision of health care services. For those contracts and policies that offer services through a preferred provider arrangement, existing law requires that the premium not exceed the average premium paid by a similar subscriber of MRMIP, as specified. For all other contracts and policies, existing law requires that the premium not exceed 170% of the standard premium charged to a similar individual, as specified.
This bill would require that the premium for all contracts and policies not exceed 170% of the standard premium charged to a similar individual, as specified, regardless of whether services are offered through a preferred provider arrangement, and would make related changes.
Because a willful violation of these requirements by a health care service plan would be a crime, the bill would impose a state-mandated local program.

Existing

(3) Existing law creates the Major Risk Medical Insurance Fund and, continuously appropriates the fund to MRMIB for purposes of MRMIP, and requires specified moneys to be deposited annually to the fund from the Cigarette and Tobacco Products Surtax Fund. Existing law, the The Knox-Keene Health Care Service Plan Act of 1975 (the act), subjects health care service plans to various fines and administrative penalties for failing to comply with specified provisions of the act and requires that certain administrative penalties be deposited in the Managed Care Fund. Existing law also requires health care service plans to pay specified assessments each fiscal year as a reimbursement of their share of the costs and expenses reasonably incurred in the administration of the act. Existing law requires the adjustment of those assessments and other charges set forth in the act if the director of the department determines that they are in excess of the amount necessary, or are insufficient, to meet the expenses of the act.
This bill would prohibit using the fines and administrative penalties authorized by the act to reduce those assessments. The bill would also require that the fines and administrative penalties authorized pursuant to the act be paid to the Major Risk Medical Insurance Fund to be used, upon appropriation by the Legislature, for the purposes of MRMIP. The bill would specify that those funds are not continuously appropriated.
This bill would further increase the moneys to be deposited into the Major Risk Medical Insurance Fund, a continuously appropriated fund, from the Cigarette and Tobacco Products Surtax Fund by a specified amount, thereby making an appropriation.
(4) 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.
(5) This bill would result in a change in state taxes for the purpose of increasing state revenues within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2/3 of the membership of each house of the Legislature.
Vote: MAJORITY2/3   Appropriation: NOYES   Fiscal Committee: YES   Local Program: NOYES  

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


SECTION 1.

 The Legislature hereby finds and declares all of the following:
(a) Since 1991, California has provided a mechanism for individuals who are not otherwise eligible for publicly sponsored health care coverage to purchase subsidized health care coverage if they have been denied coverage or offered only high-cost individual coverage. The Major Risk Medical Insurance Program (MRMIP), administered by the Managed Risk Medical Insurance Board (MRMIB), offers coverage to medically uninsurable persons through willing private health plans participating in the program on a voluntary basis.
(b) MRMIP offers comprehensive coverage for uninsurable individuals at premium rates significantly higher than standard market rates and subsidizes the costs of coverage not paid by subscriber premiums through an allocation of state funds. Despite the high cost of participation in MRMIP, the benefits provided are limited and choices regarding coverage are absent.
(c) As of May 31, 2008, MRMIP provided coverage to 7,305 residents. Although waiting lists are generally rare in other state high-risk insurance pools, the waiting list for MRMIP, as of June 2008, exceeded 800 individuals. In May 2008, MRMIB reduced the enrollment cap for MRMIP from 8,100 individuals to 7,100 individuals, and will only allow enrollment from the waiting list when enrollment declines to below 7,100.
(d) The uninsurable population in California is poorly defined and difficult to measure. Estimates of the size of that population range from 165,000 to 396,000 individuals.
(e) It is the intent of the Legislature to enact legislation directed toward a segment of the uninsured population with little or no access to the private insurance market, and to provide sustainable funding, improved benefits, and cost-effective plan designs that increase patient access to MRMIP and the individual insurance market while preserving choice.

SEC. 2.

 Section 1341.45 is added to the Health and Safety Code, to read:

1341.45.
 The fines and administrative penalties authorized pursuant to this chapter shall be paid to the Major Risk Medical Insurance Fund created by Section 12739 of the Insurance Code and shall, upon appropriation by the Legislature, be used for the purposes of the Major Risk Medical Insurance Program, as specified in Part 6.5 (commencing with Section 12700) of Division 2 of the Insurance Code. Notwithstanding Section 1356.1, these fines and penalties shall not be used to reduce the assessments imposed on health care service plans pursuant to Section 1356.

SEC. 3.

 Section 1356.2 is added to the Health and Safety Code, to read:

1356.2.
 (a) A health care service plan providing coverage for hospital, medical, or surgical benefits under an individual health care service plan contract shall impose a surcharge on each person covered by an individual health care service plan contract pursuant to the following schedule:
(1) Beginning July 1, 2009, through June 30, 2010, the surcharge shall be 35 cents ($0.35) per member, per month.
(2) Beginning July 1, 2010, through June 30, 2011, the surcharge shall be 50 cents ($0.50) per member, per month.
(3) Beginning July 1, 2011, through June 30, 2012, the surcharge shall be 70 cents ($0.70) per member, per month.
(4) Beginning July 1, 2012, through June 30, 2013, the surcharge shall be 85 cents ($0.85) per member, per month.
(5) Beginning July 1, 2013, and thereafter, the surcharge shall be one dollar ($1) per member, per month.
(b) The surcharge imposed pursuant to subdivision (a) shall be deposited in the Major Risk Medical Insurance Fund, created pursuant to Section 12739 of the Insurance Code. Revenues derived from the surcharge imposed pursuant to this section shall not be considered to be state General Fund proceeds of taxes within the meaning of Article XVI of the Constitution, as they are being held by the state in the Major Risk Medical Insurance Fund as a trustee for the benefit of individuals who are uninsurable on the health insurance market.
(c) On or before May 15 of each year, beginning May 15, 2009, each health care service plan shall report to the department and the Managed Risk Medical Insurance Board the number of individuals covered by the plan’s individual health care service plan contracts as of March 31 of that year. The surcharge provided for in this section may be paid in two installments. The first installment shall be paid on or before August 1 of each year, and the second installment shall be paid on or before December 15 of each year.
(d) If state funds appropriated to the Major Risk Medical Insurance Program are less than forty million dollars ($40,000,000) for any fiscal year, exclusive of funds made available to the program pursuant to Section 1341.45, the surcharge described in subdivision (a) shall be suspended for the subsequent fiscal year.
(e) The surcharge described in subdivision (a) shall be excluded from the computation of a plan’s administrative expenses pursuant to Section 1378 or regulations adopted in that regard.
(f) This section shall remain in effect only until January 1, 2014, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2014, deletes or extends that date.

SEC. 3.SEC. 4.

 Section 1357.55 is added to the Health and Safety Code, to read:

1357.55.
 (a) Notwithstanding Section 1357.51, an individual health care service plan contract issued to a member of the rider pool created pursuant to Section 12738.1 of the Insurance Code may permanently or temporarily exclude coverage for the member’s qualifying condition or conditions, as identified in the documentation described in subdivision (b) of Section 12738.1 of the Insurance Code.
(b) This section shall remain in effect only until January 1, 2014, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2014, deletes or extends that date.

SEC. 4.SEC. 5.

 Section 1367.01 of the Health and Safety Code is amended to read:

1367.01.
 (a) A health care service plan and any entity with which it contracts for services that include utilization review or utilization management functions, that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b) A health care service plan that is subject to this section shall have written policies and procedures establishing the process by which the plan prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for plan enrollees. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to Section 1363.5. These policies and procedures, and a description of the process by which the plan reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, shall be filed with the director for review and approval, and shall be disclosed by the plan to providers and enrollees upon request, and by the plan to the public upon request.
(c) A health care service plan subject to this section, except a plan that meets the requirements of Section 1351.2, shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or pursuant to the Osteopathic Act, or, if the plan is a specialized health care service plan, a clinical director with California licensure in a clinical area appropriate to the type of care provided by the specialized health care service plan. The medical director or clinical director shall ensure that the process by which the plan reviews and approves, modifies, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, complies with the requirements of this section.
(d) If health plan personnel, or individuals under contract to the plan to review requests by providers, approve the provider’s request, pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e) No individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may deny or modify requests for authorization of health care services for an enrollee for reasons of medical necessity. The decision of the physician or other health care professional shall be communicated to the provider and the enrollee pursuant to subdivision (h).
(f) The criteria or guidelines used by the health care service plan to determine whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall be consistent with clinical principles and processes. These criteria and guidelines shall be developed pursuant to the requirements of Section 1363.5.
(g) If the health care service plan requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the plan shall request only the information reasonably necessary to make the determination.
(h) In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, based in whole or in part on medical necessity, a health care service plan subject to this section shall meet the following requirements:
(1) Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with the provision of health care services to enrollees that do not meet the requirements for the 72-hour review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the enrollee’s condition, not to exceed five business days from the plan’s receipt of the information reasonably necessary and requested by the plan to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individual’s designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2) When the enrollee’s condition is such that the enrollee faces an imminent and serious threat to his or her health including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the enrollee’s life or health or could jeopardize the enrollee’s ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to enrollees, shall be made in a timely fashion appropriate for the nature of the enrollee’s condition, not to exceed 72 hours after the plan’s receipt of the information reasonably necessary and requested by the plan to make the determination. Nothing in this section shall be construed to alter the requirements of subdivision (b) of Section 1371.4. Notwithstanding Section 1371.4, the requirements of this division shall be applicable to all health plans and other entities conducting utilization review or utilization management.
(3) Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the enrollee’s treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the enrollee in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the enrollee’s treating provider has been notified of the plan’s decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4) Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall be communicated to the enrollee in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the plan’s decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification of a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the enrollee may file a grievance with the plan pursuant to Section 1368, and in the case of Medi-Cal enrollees, shall explain how to request an administrative hearing and aid paid pending under Sections 51014.1 and 51014.2 of Title 22 of the California Code of Regulations.
(5) If the health care service plan cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the plan is not in receipt of all of the information reasonably necessary and requested, or because the plan requires consultation by an expert reviewer, or because the plan has asked that an additional examination or test be performed upon the enrollee, provided the examination or test is reasonable and consistent with good medical practice, the plan shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2) or as soon as the plan becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the enrollee, in writing, that the plan cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The plan shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the plan, the plan shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6) If the director determines that a health care service plan has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the director may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected, in accordance with subdivision (a) of Section 1397. The administrative penalties shall not be deemed an exclusive remedy for the director.
(i) A health care service plan subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j) A health care service plan subject to this section that reviews requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall establish, as part of the quality assurance program required by Section 1370, a process by which the plan’s compliance with this section is assessed and evaluated. The process shall include provisions for evaluation of complaints, assessment of trends, implementation of actions to correct identified problems, mechanisms to communicate actions and results to the appropriate health plan employees and contracting providers, and provisions for evaluation of any corrective action plan and measurements of performance.
(k) The director shall review a health care service plan’s compliance with this section as part of its periodic onsite medical survey of each plan undertaken pursuant to Section 1380, and shall include a discussion of compliance with this section as part of its report issued pursuant to that section.
(l) This section shall not apply to decisions made for the care or treatment of the sick who depend upon prayer or spiritual means for healing in the practice of religion as set forth in subdivision (a) of Section 1270.
(m) Nothing in this section shall cause a health care service plan to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.

SEC. 5. SEC. 6.

 Section 1367.03 of the Health and Safety Code is amended to read:

1367.03.
 (a) Not later than January 1, 2004, the department shall develop and adopt regulations to ensure that enrollees have access to needed health care services in a timely manner. In developing these regulations, the department shall develop indicators of timeliness of access to care and, in so doing, shall consider the following as indicators of timeliness of access to care:
(1) Waiting times for appointments with physicians, including primary care and specialty physicians.
(2) Timeliness of care in an episode of illness, including the timeliness of referrals and obtaining other services, if needed.
(3) Waiting time to speak to a physician, registered nurse, or other qualified health professional acting within his or her scope of practice who is trained to screen or triage an enrollee who may need care.
(b) In developing these standards for timeliness of access, the department shall consider the following:
(1) Clinical appropriateness.
(2) The nature of the specialty.
(3) The urgency of care.
(4) The requirements of other provisions of law, including Section 1367.01 governing utilization review, that may affect timeliness of access.
(c) The department may adopt standards other than the time elapsed between the time an enrollee seeks health care and obtains care. If the department chooses a standard other than the time elapsed between the time an enrollee first seeks health care and obtains it, the department shall demonstrate why that standard is more appropriate. In developing these standards, the department shall consider the nature of the plan network.
(d) The department shall review and adopt standards, as needed, concerning the availability of primary care physicians, specialty physicians, hospital care, and other health care, so that consumers have timely access to care. In so doing, the department shall consider the nature of physician practices, including individual and group practices as well as the nature of the plan network. The department shall also consider various circumstances affecting the delivery of care, including urgent care, care provided on the same day, and requests for specific providers. If the department finds that health care service plans and health care providers have difficulty meeting these standards, the department may make recommendations to the Assembly Committee on Health and the Senate Committee on Insurance of the Legislature pursuant to subdivision (i).
(e) In developing standards under subdivision (a), the department shall consider requirements under federal law, requirements under other state programs, standards adopted by other states, nationally recognized accrediting organizations, and professional associations. The department shall further consider the needs of rural areas, specifically those in which health facilities are more than 30 miles apart and any requirements imposed by the State Department of Health Care Services on health care service plans that contract with the State Department of Health Care Services to provide Medi-Cal managed care.
(f) (1) Contracts between health care service plans and health care providers shall assure compliance with the standards developed under this section. These contracts shall require reporting by health care providers to health care service plans and by health care service plans to the department to ensure compliance with the standards.
(2) Health care service plans shall report annually to the department on compliance with the standards in a manner specified by the department. The reported information shall allow consumers to compare the performance of plans and their contracting providers in complying with the standards, as well as changes in the compliance of plans with these standards.
(g) (1) When evaluating compliance with the standards, the department shall focus more upon patterns of noncompliance rather than isolated episodes of noncompliance.
(2) The director may investigate and take enforcement action against plans regarding noncompliance with the requirements of this section. Where substantial harm to an enrollee has occurred as a result of plan noncompliance, the director may, by order, assess administrative penalties subject to appropriate notice of, and the opportunity for, a hearing in accordance with Section 1397. The plan may provide to the director, and the director may consider, information regarding the plan’s overall compliance with the requirements of this section. The administrative penalties shall not be deemed an exclusive remedy available to the director. The director shall periodically evaluate grievances to determine if any audit, investigative, or enforcement actions should be undertaken by the department.
(3) The director may, after appropriate notice and opportunity for hearing in accordance with Section 1397, by order, assess administrative penalties if the director determines that a health care service plan has knowingly committed, or has performed with a frequency that indicates a general business practice, either of the following:
(A) Repeated failure to act promptly and reasonably to assure timely access to care consistent with this chapter.
(B) Repeated failure to act promptly and reasonably to require contracting providers to assure timely access that the plan is required to perform under this chapter and that have been delegated by the plan to the contracting provider when the obligation of the plan to the enrollee or subscriber is reasonably clear.
(C) The administrative penalties available to the director pursuant to this section are not exclusive, and may be sought and employed in any combination with civil, criminal, and other administrative remedies deemed warranted by the director to enforce this chapter.
(h) The department shall work with the patient advocate to assure that the quality of care report card incorporates information provided pursuant to subdivision (f) regarding the degree to which health care service plans and health care providers comply with the requirements for timely access to care.
(i) The department shall report to the Assembly Committee on Health and the Senate Committee on Insurance of the Legislature on March 1, 2003, and on March 1, 2004, regarding the progress toward the implementation of this section.
(j) Every three years, the department shall review information regarding compliance with the standards developed under this section and shall make recommendations for changes that further protect enrollees.

SEC. 6.SEC. 7.

 Section 1368 of the Health and Safety Code is amended to read:

1368.
 (a) Every plan shall do all of the following:
(1) Establish and maintain a grievance system approved by the department under which enrollees may submit their grievances to the plan. Each system shall provide reasonable procedures in accordance with department regulations that shall ensure adequate consideration of enrollee grievances and rectification when appropriate.
(2) Inform its subscribers and enrollees upon enrollment in the plan and annually thereafter of the procedure for processing and resolving grievances. The information shall include the location and telephone number where grievances may be submitted.
(3) Provide forms for grievances to be given to subscribers and enrollees who wish to register written grievances. The forms used by plans licensed pursuant to Section 1353 shall be approved by the director in advance as to format.
(4) (A) Provide for a written acknowledgment within five calendar days of the receipt of a grievance, except as noted in subparagraph (B). The acknowledgment shall advise the complainant of the following:
(i) That the grievance has been received.
(ii) The date of receipt.
(iii) The name of the plan representative and the telephone number and address of the plan representative who may be contacted about the grievance.
(B) Grievances received by telephone, by facsimile, by e-mail, or online through the plan’s Web site pursuant to Section 1368.015, that are not coverage disputes, disputed health care services involving medical necessity, or experimental or investigational treatment and that are resolved by the next business day following receipt are exempt from the requirements of subparagraph (A) and paragraph (5). The plan shall maintain a log of all these grievances. The log shall be periodically reviewed by the plan and shall include the following information for each complaint:
(i) The date of the call.
(ii) The name of the complainant.
(iii) The complainant’s member identification number.
(iv) The nature of the grievance.
(v) The nature of the resolution.
(vi) The name of the plan representative who took the call and resolved the grievance.
(5) Provide subscribers and enrollees with written responses to grievances, with a clear and concise explanation of the reasons for the plan’s response. For grievances involving the delay, denial, or modification of health care services, the plan response shall describe the criteria used and the clinical reasons for its decision, including all criteria and clinical reasons related to medical necessity. If a plan, or one of its contracting providers, issues a decision delaying, denying, or modifying health care services based in whole or in part on a finding that the proposed health care services are not a covered benefit under the contract that applies to the enrollee, the decision shall clearly specify the provisions in the contract that exclude that coverage.
(6) Keep in its files all copies of grievances, and the responses thereto, for a period of five years.
(b) (1) (A) After either completing the grievance process described in subdivision (a), or participating in the process for at least 30 days, a subscriber or enrollee may submit the grievance to the department for review. In any case determined by the department to be a case involving an imminent and serious threat to the health of the patient, including, but not limited to, severe pain, the potential loss of life, limb, or major bodily function, or in any other case where the department determines that an earlier review is warranted, a subscriber or enrollee shall not be required to complete the grievance process or to participate in the process for at least 30 days before submitting a grievance to the department for review.
(B) A grievance may be submitted to the department for review and resolution prior to any arbitration.
(C) Notwithstanding subparagraphs (A) and (B), the department may refer any grievance that does not pertain to compliance with this chapter to the State Department of Health Services, the California Department of Aging, the federal Health Care Financing Administration, or any other appropriate governmental entity for investigation and resolution.
(2) If the subscriber or enrollee is a minor, or is incompetent or incapacitated, the parent, guardian, conservator, relative, or other designee of the subscriber or enrollee, as appropriate, may submit the grievance to the department as the agent of the subscriber or enrollee. Further, a provider may join with, or otherwise assist, a subscriber or enrollee, or the agent, to submit the grievance to the department. In addition, following submission of the grievance to the department, the subscriber or enrollee, or the agent, may authorize the provider to assist, including advocating on behalf of the subscriber or enrollee. For purposes of this section, a “relative” includes the parent, stepparent, spouse, adult son or daughter, grandparent, brother, sister, uncle, or aunt of the subscriber or enrollee.
(3) The department shall review the written documents submitted with the subscriber’s or the enrollee’s request for review, or submitted by the agent on behalf of the subscriber or enrollee. The department may ask for additional information, and may hold an informal meeting with the involved parties, including providers who have joined in submitting the grievance or who are otherwise assisting or advocating on behalf of the subscriber or enrollee. If after reviewing the record, the department concludes that the grievance, in whole or in part, is eligible for review under the independent medical review system established pursuant to Article 5.55 (commencing with Section 1374.30), the department shall immediately notify the subscriber or enrollee, or agent, of that option and shall, if requested orally or in writing, assist the subscriber or enrollee in participating in the independent medical review system.
(4) If after reviewing the record of a grievance, the department concludes that a health care service eligible for coverage and payment under a health care service plan contract has been delayed, denied, or modified by a plan, or by one of its contracting providers, in whole or in part due to a determination that the service is not medically necessary, and that determination was not communicated to the enrollee in writing along with a notice of the enrollee’s potential right to participate in the independent medical review system, as required by this chapter, the director shall, by order, assess administrative penalties. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice of, and the opportunity for, a hearing with regard to the person affected in accordance with Section 1397. The administrative penalties shall not be deemed an exclusive remedy available to the director.
(5) The department shall send a written notice of the final disposition of the grievance, and the reasons therefor, to the subscriber or enrollee, the agent, to any provider that has joined with or is otherwise assisting the subscriber or enrollee, and to the plan, within 30 calendar days of receipt of the request for review unless the director, in his or her discretion, determines that additional time is reasonably necessary to fully and fairly evaluate the relevant grievance. In any case not eligible for the independent medical review system established pursuant to Article 5.55 (commencing with Section 1374.30), the department’s written notice shall include, at a minimum, the following:
(A) A summary of its findings and the reasons why the department found the plan to be, or not to be, in compliance with any applicable laws, regulations, or orders of the director.
(B) A discussion of the department’s contact with any medical provider, or any other independent expert relied on by the department, along with a summary of the views and qualifications of that provider or expert.
(C)  If the enrollee’s grievance is sustained in whole or part, information about any corrective action taken.
(6) In any department review of a grievance involving a disputed health care service, as defined in subdivision (b) of Section 1374.30, that is not eligible for the independent medical review system established pursuant to Article 5.55 (commencing with Section 1374.30), in which the department finds that the plan has delayed, denied, or modified health care services that are medically necessary, based on the specific medical circumstances of the enrollee, and those services are a covered benefit under the terms and conditions of the health care service plan contract, the department’s written notice shall do either of the following:
(A) Order the plan to promptly offer and provide those health care services to the enrollee.
(B) Order the plan to promptly reimburse the enrollee for any reasonable costs associated with urgent care or emergency services, or other extraordinary and compelling health care services, when the department finds that the enrollee’s decision to secure those services outside of the plan network was reasonable under the circumstances.
The department’s order shall be binding on the plan.
(7) Distribution of the written notice shall not be deemed a waiver of any exemption or privilege under existing law, including, but not limited to, Section 6254.5 of the Government Code, for any information in connection with and including the written notice, nor shall any person employed or in any way retained by the department be required to testify as to that information or notice.
(8) The director shall establish and maintain a system of aging of grievances that are pending and unresolved for 30 days or more that shall include a brief explanation of the reasons each grievance is pending and unresolved for 30 days or more.
(9) A subscriber or enrollee, or the agent acting on behalf of a subscriber or enrollee, may also request voluntary mediation with the plan prior to exercising the right to submit a grievance to the department. The use of mediation services shall not preclude the right to submit a grievance to the department upon completion of mediation. In order to initiate mediation, the subscriber or enrollee, or the agent acting on behalf of the subscriber or enrollee, and the plan shall voluntarily agree to mediation. Expenses for mediation shall be borne equally by both sides. The department shall have no administrative or enforcement responsibilities in connection with the voluntary mediation process authorized by this paragraph.
(c) The plan’s grievance system shall include a system of aging of grievances that are pending and unresolved for 30 days or more. The plan shall provide a quarterly report to the director of grievances pending and unresolved for 30 or more days with separate categories of grievances for Medicare enrollees and Medi-Cal enrollees. The plan shall include with the report a brief explanation of the reasons each grievance is pending and unresolved for 30 days or more. The plan may include the following statement in the quarterly report that is made available to the public by the director:
“Under Medicare and Medi-Cal law, Medicare enrollees and Medi-Cal enrollees each have separate avenues of appeal that are not available to other enrollees. Therefore, grievances pending and unresolved may reflect enrollees pursuing their Medicare or Medi-Cal appeal rights.”
If requested by a plan, the director shall include this statement in a written report made available to the public and prepared by the director that describes or compares grievances that are pending and unresolved with the plan for 30 days or more. Additionally, the director shall, if requested by a plan, append to that written report a brief explanation, provided in writing by the plan, of the reasons why grievances described in that written report are pending and unresolved for 30 days or more. The director shall not be required to include a statement or append a brief explanation to a written report that the director is required to prepare under this chapter, including Sections 1380 and 1397.5.
(d) Subject to subparagraph (C) of paragraph (1) of subdivision (b), the grievance or resolution procedures authorized by this section shall be in addition to any other procedures that may be available to any person, and failure to pursue, exhaust, or engage in the procedures described in this section shall not preclude the use of any other remedy provided by law.
(e) Nothing in this section shall be construed to allow the submission to the department of any provider grievance under this section. However, as part of a provider’s duty to advocate for medically appropriate health care for his or her patients pursuant to Sections 510 and 2056 of the Business and Professions Code, nothing in this subdivision shall be construed to prohibit a provider from contacting and informing the department about any concerns he or she has regarding compliance with or enforcement of this chapter.

SEC. 7.SEC. 8.

 Section 1368.04 of the Health and Safety Code is amended to read:

1368.04.
 (a) The director shall investigate and take enforcement action against plans regarding grievances reviewed and found by the department to involve noncompliance with the requirements of this chapter, including grievances that have been reviewed pursuant to the independent medical review system established pursuant to Article 5.55 (commencing with Section 1374.30). Where substantial harm to an enrollee has occurred as a result of plan noncompliance, the director shall, by order, assess administrative penalties subject to appropriate notice of, and the opportunity for, a hearing with regard to the person affected in accordance with Section 1397. The administrative penalties shall not be deemed an exclusive remedy available to the director. The director shall periodically evaluate grievances to determine if any audit, investigative, or enforcement actions should be undertaken by the department.
(b) The director may, after appropriate notice and opportunity for hearing in accordance with Section 1397, by order, assess administrative penalties if the director determines that a health care service plan has knowingly committed, or has performed with a frequency that indicates a general business practice, either of the following:
(1) Repeated failure to act promptly and reasonably to investigate and resolve grievances in accordance with Section 1368.01.
(2) Repeated failure to act promptly and reasonably to resolve grievances when the obligation of the plan to the enrollee or subscriber is reasonably clear.
(c) The administrative penalties available to the director pursuant to this section are not exclusive, and may be sought and employed in any combination with civil, criminal, and other administrative remedies deemed warranted by the director to enforce this chapter.

SEC. 8.SEC. 9.

 Section 1374.9 of the Health and Safety Code is amended to read:

1374.9.
 For violations of Section 1374.7, the director may, after appropriate notice and opportunity for hearing, by order, levy administrative penalties as follows:
(a) Any health care service plan that violates Section 1374.7, or that violates any rule or order adopted or issued pursuant to this section, is liable for administrative penalties of not less than two thousand five hundred dollars ($2,500) for each first violation, and of not less than five thousand dollars ($5,000) nor more than ten thousand dollars ($10,000) for each second violation, and of not less than fifteen thousand dollars ($15,000) and not more than one hundred thousand dollars ($100,000) for each subsequent violation.
(b) The administrative penalties available to the director pursuant to this section are not exclusive, and may be sought and employed in any combination with civil, criminal, and other administrative remedies deemed advisable by the director to enforce the provisions of this chapter.

SEC. 9.SEC. 10.

 Section 1374.34 of the Health and Safety Code is amended to read:

1374.34.
 (a) Upon receiving the decision adopted by the director pursuant to Section 1374.33 that a disputed health care service is medically necessary, the plan shall promptly implement the decision. In the case of reimbursement for services already rendered, the plan shall reimburse the provider or enrollee, whichever applies, within five working days. In the case of services not yet rendered, the plan shall authorize the services within five working days of receipt of the written decision from the director, or sooner if appropriate for the nature of the enrollee’s medical condition, and shall inform the enrollee and provider of the authorization in accordance with the requirements of paragraph (3) of subdivision (h) of Section 1367.01.
(b) A plan shall not engage in any conduct that has the effect of prolonging the independent review process. The engaging in that conduct or the failure of the plan to promptly implement the decision is a violation of this chapter and, in addition to any other fines, penalties, and other remedies available to the director under this chapter, the plan shall be subject to an administrative penalty of not less than five thousand dollars ($5,000) for each day that the decision is not implemented.
(c) The director shall require the plan to promptly reimburse the enrollee for any reasonable costs associated with those services when the director finds that the disputed health care services were a covered benefit under the terms and conditions of the health care service plan contract, and the services are found by the independent medical review organization to have been medically necessary pursuant to Section 1374.33, and either the enrollee’s decision to secure the services outside of the plan provider network was reasonable under the emergency or urgent medical circumstances, or the health care service plan contract does not require or provide prior authorization before the health care services are provided to the enrollee.
(d) In addition to requiring plan compliance regarding subdivisions (a), (b), and (c) the director shall review individual cases submitted for independent medical review to determine whether any enforcement actions, including penalties, may be appropriate. In particular, where substantial harm, as defined in Section 3428 of the Civil Code, to an enrollee has already occurred because of the decision of a plan, or one of its contracting providers, to delay, deny, or modify covered health care services that an independent medical review determines to be medically necessary pursuant to Section 1374.33, the director shall impose penalties.
(e) Pursuant to Section 1368.04, the director shall perform an annual audit of independent medical review cases for the dual purposes of education and the opportunity to determine if any investigative or enforcement actions should be undertaken by the department, particularly if a plan repeatedly fails to act promptly and reasonably to resolve grievances associated with a delay, denial, or modification of medically necessary health care services when the obligation of the plan to provide those health care services to enrollees or subscribers is reasonably clear.

SEC. 10.SEC. 11.

 Section 1393.6 of the Health and Safety Code is amended to read:

1393.6.
 For violations of Article 3.1 (commencing with Section 1357) and Article 3.15 (commencing with Section 1357.50), the director may, after appropriate notice and opportunity for hearing, by order levy administrative penalties as follows:
(a) Any person, solicitor, or solicitor firm, other than a health care service plan, who willfully violates any provision of this chapter, or who willfully violates any rule or order adopted or issued pursuant to this chapter, is liable for administrative penalties of not less than two hundred fifty dollars ($250) for each first violation, and of not less than one thousand dollars ($1,000) and not more than two thousand five hundred dollars ($2,500) for each subsequent violation.
(b) Any health care service plan that willfully violates any provision of this chapter, or that willfully violates any rule or order adopted or issued pursuant to this chapter, is liable for administrative penalties of not less than two thousand five hundred dollars ($2,500) for each first violation, and of not less than five thousand dollars ($5,000) nor more than ten thousand dollars ($10,000) for each second violation, and of not less than fifteen thousand dollars ($15,000) and not more than one hundred thousand dollars ($100,000) for each subsequent violation.
(c) The administrative penalties available to the director pursuant to this section are not exclusive, and may be sought and employed in any combination with civil, criminal, and other administrative remedies deemed advisable by the director to enforce the provisions of this chapter.

SEC. 12.

 Section 1399.805 of the Health and Safety Code is amended to read:

1399.805.
 (a) (1) After the federally eligible defined individual submits a completed application form for a plan contract, the plan shall, within 30 days, notify the individual of the individual’s actual premium charges for that plan contract, unless the plan has provided notice of the premium charge prior to the application being filed. In no case shall the premium charged for any health care service plan contract identified in subdivision (d) of Section 1366.35 exceed the following amounts:

(A)For health care service plan contracts that offer services through a preferred provider arrangement, the average premium paid by a subscriber of the Major Risk Medical Insurance Program who is of the same age and resides in the same geographic area as the federally eligible defined individual. However, for federally qualified individuals who are between the ages of 60 and 64, inclusive, the premium shall not exceed the average premium paid by a subscriber of the Major Risk Medical Insurance Program who is 59 years of age and resides in the same geographic area as the federally eligible defined individual.

(B)For health care service plan contracts identified in subdivision (d) of Section 1366.35 that do not offer services through a preferred provider arrangement, 170 percent of the standard premium charged to an individual who is of the same age and resides in the same geographic area as the federally eligible defined individual. However, for federally qualified individuals who are between the ages of 60 and 64, inclusive, the premium shall not exceed 170 percent of the standard premium charged to an individual who is 59 years of age and resides in the same geographic area as the federally eligible defined individual. The individual shall have 30 days in which to exercise the right to buy coverage at the quoted premium rates.
(2) A plan may adjust the premium based on family size, not to exceed the following amounts:

(A)For health care service plans that offer services through a preferred provider arrangement, the average of the Major Risk Medical Insurance Program rate for families of the same size that reside in the same geographic area as the federally eligible defined individual.

(B)For health care service plans identified in subdivision (d) of Section 1366.35 that do not offer services through a preferred provider arrangement, 170 percent of the standard premium charged to a family that is of the same size and resides in the same geographic area as the federally eligible defined individual.
(b) When a federally eligible defined individual submits a premium payment, based on the quoted premium charges, and that payment is delivered or postmarked, whichever occurs earlier, within the first 15 days of the month, coverage shall begin no later than the first day of the following month. When that payment is neither delivered or postmarked until after the 15th day of a month, coverage shall become effective no later than the first day of the second month following delivery or postmark of the payment.
(c) During the first 30 days after the effective date of the plan contract, the individual shall have the option of changing coverage to a different plan contract offered by the same health care service plan. If the individual notified the plan of the change within the first 15 days of a month, coverage under the new plan contract shall become effective no later than the first day of the following month. If an enrolled individual notified the plan of the change after the 15th day of a month, coverage under the new plan contract shall become effective no later than the first day of the second month following notification.

SEC. 13.

 Section 1399.811 of the Health and Safety Code is amended to read:

1399.811.
 Premiums for contracts offered, delivered, amended, or renewed by plans on or after January 1, 2001, shall be subject to the following requirements:
(a) The premium for new business for a federally eligible defined individual shall not exceed the following amounts:

(1)For health care service plan contracts identified in subdivision (d) of Section 1366.35 that offer services through a preferred provider arrangement, the average premium paid by a subscriber of the Major Risk Medical Insurance Program who is of the same age and resides in the same geographic area as the federally eligible defined individual. However, for federally qualified individuals who are between the ages of 60 to 64 years, inclusive, the premium shall not exceed the average premium paid by a subscriber of the Major Risk Medical Insurance Program who is 59 years of age and resides in the same geographic area as the federally eligible defined individual.

For healt care service plan contracts identified in subdivision (d) of Section 1366.35 that do not offer services through a preferred provider arrangement, 170 percent of the standard premium charged to an individual who is of the same age and resides in the same geographic area as the federally eligible defined individual. However, for federally qualified individuals who are between the ages of 60 to 64 years, inclusive, the premium shall not exceed 170 percent of the standard premium charged to an individual who is 59 years of age and resides in the same geographic area as the federally eligible defined individual.
(b) The premium for in force business for a federally eligible defined individual shall not exceed the following amounts:

(1)For health care service plan contracts identified in subdivision (d) of Section 1366.35 that offer services through a preferred provider arrangement, the average premium paid by a subscriber of the Major Risk Medical Insurance Program who is of the same age and resides in the same geographic area as the federally eligible defined individual. However, for federally qualified individuals who are between the ages of 60 and 64 years, inclusive, the premium shall not exceed the average premium paid by a subscriber of the Major Risk Medical Insurance Program who is 59 years of age and resides in the same geographic area as the federally eligible defined individual.

(2)For health care service plan contracts identified in subdivision (d) of Section 1366.35 that do not offer services through a preferred provider arrangement, 170 percent of the standard premium charged to an individual who is of the same age and resides in the same geographic area as the federally eligible defined individual. However, for federally qualified individuals who are between the ages of 60 and 64 years, inclusive, the premium shall not exceed 170 percent of the standard premium charged to an individual who is 59 years of age and resides in the same geographic area as the federally eligible defined individual. The premium effective on January 1, 2001, shall apply to in force business at the earlier of either the time of renewal or July 1, 2001.
(c) The premium applied to a federally eligible defined individual may not increase by more than the following amounts:

(1)For health care service plan contracts identified in subdivision (d) of Section 1366.35 that offer services through a preferred provider arrangement, the average increase in the premiums charged to a subscriber of the Major Risk Medical Insurance Program who is of the same age and resides in the same geographic area as the federally eligible defined individual.

(2)For health care service plan contracts identified in subdivision (d) of Section 1366.35 that do not offer services through a preferred provider arrangement

(1) Except as provided in paragraph (2), the increase in premiums charged to a nonfederally qualified individual who is of the same age and resides in the same geographic area as the federally defined eligible individual. The premium for an eligible individual may not be modified more frequently than every 12 months.

(3)

(2) For a contract that a plan has discontinued offering, the premium applied to the first rating period of the new contract that the federally eligible defined individual elects to purchase shall be no greater than the premium applied in the prior rating period to the discontinued contract.

SEC. 14.

 Section 10127.19 is added to the Insurance Code, to read:

10127.19.
 (a) A health insurer providing coverage for hospital, medical, or surgical benefits under an individual health insurance policy shall impose a surcharge on each person covered under an individual health insurance policy pursuant to the following schedule:
(1) Beginning July 1, 2009, through June 30, 2010, the surcharge shall be 35 cents ($0.35) per individual, per month.
(2) Beginning July 1, 2010, through June 30, 2011, the surcharge shall be 50 cents ($0.50) per individual, per month.
(3) Beginning July 1, 2011, through June 30, 2012, the surcharge shall be 70 cents ($0.70) per individual, per month.
(4) Beginning July 1, 2012, through June 30, 2013, the surcharge shall be 85 cents ($0.85) per individual, per month.
(5) Beginning July 1, 2013, and thereafter, the surcharge shall be one dollar ($1) per individual, per month.
(b) The surcharge shall be deposited in the Major Risk Medical Insurance Fund, created pursuant to Section 12739. Revenues derived from the surcharge imposed pursuant to this section shall not be considered to be state General Fund proceeds of taxes within the meaning of Article XVI of the Constitution, as they are being held by the state in the Major Risk Medical Insurance Fund as a trustee for the benefit of individuals who are uninsurable on the health insurance market.
(c) On or before May 15 of each year, beginning May 15, 2009, each insurer covered under this section shall report to the department and the Managed Risk Medical Insurance Board the number of individuals covered by the insurer’s individual health insurance policies as of March 31 of that year. The surcharge provided for in this section may be paid in two installments. The first installment shall be paid on or before August 1 of each year, and the second installment shall be paid on or before December 15 of each year.
(d) If state funds appropriated to the Major Risk Medical Insurance Program are less than forty million dollars ($40,000,000) for any fiscal year, exclusive of funds made available to the program pursuant to Section 1341.45 of the Health and Safety Code, the surcharge described in subdivision (a) shall be suspended for the subsequent fiscal year.
(e) The surcharge described in subdivision (a) shall be excluded from the computation of an insurer’s administrative expenses.
(f) This section shall remain in effect only until January 1, 2014, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2014, deletes or extends that date.

SEC. 11.SEC. 15.

 Section 10198.11 is added to the Insurance Code, to read:

10198.11.
 (a) Notwithstanding Section 10198.7, an individual health insurance policy issued to a member of the rider pool created pursuant to Section 12738.1 may permanently or temporarily exclude coverage for the member’s qualifying condition or conditions, as identified in the documentation described in subdivision (b) of Section 12738.1.
(b) This section shall remain in effect only until January 1, 2014, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2014, deletes or extends that date.

SEC. 16.

 Section 10901.3 of the Insurance Code is amended to read:

10901.3.
 (a) (1) After the federally eligible defined individual submits a completed application form for a health benefit plan, the carrier shall, within 30 days, notify the individual of the individual’s actual premium charges for that health benefit plan design. In no case shall the premium charged for any health benefit plan identified in subdivision (d) of Section 10785 exceed the following amounts:

(A)For health benefit plans that offer services through a preferred provider arrangement, the average premium paid by a subscriber of the Major Risk Medical Insurance Program who is of the same age and resides in the same geographic area as the federally eligible defined individual. However, for federally qualified individuals who are between the ages of 60 and 64, inclusive, the premium shall not exceed the average premium paid by a subscriber of the Major Risk Medical Insurance Program who is 59 years of age and resides in the same geographic area as the federally eligible defined individual.

(B)For health benefit plans identified in subdivision (d) of Section 10785 that do not offer services through a preferred provider arrangement, 170 percent of the standard premium charged to an individual who is of the same age and resides in the same geographic area as the federally eligible defined individual. However, for federally qualified individuals who are between the ages of 60 and 64, inclusive, the premium shall not exceed 170 percent of the standard premium charged to an individual who is 59 years of age and resides in the same geographic area as the federally eligible defined individual. The individual shall have 30 days in which to exercise the right to buy coverage at the quoted premium rates.
(2) A carrier may adjust the premium based on family size, not to exceed the following amounts:

(A)For health benefit plans that offer services through a preferred provider arrangement, the average of the Major Risk Medical Insurance Program rate for families of the same size that reside in the same geographic area as the federally eligible defined individual.

(B)For health benefit plans identified in subdivision (d) of Section 10785 that do not offer services through a preferred provider arrangement, 170 percent of the standard premium charged to a family that is of the same size and resides in the same geographic area as the federally eligible defined individual.
(b) When a federally eligible defined individual submits a premium payment, based on the quoted premium charges, and that payment is delivered or postmarked, whichever occurs earlier, within the first 15 days of the month, coverage shall begin no later than the first day of the following month. When that payment is neither delivered or postmarked until after the 15th day of a month, coverage shall become effective no later than the first day of the second month following delivery or postmark of the payment.
(c) During the first 30 days after the effective date of the health benefit plan, the individual shall have the option of changing coverage to a different health benefit plan design offered by the same carrier. If the individual notified the plan of the change within the first 15 days of a month, coverage under the new health benefit plan shall become effective no later than the first day of the following month. If an enrolled individual notified the carrier of the change after the 15th day of a month, coverage under the health benefit plan shall become effective no later than the first day of the second month following notification.

SEC. 17.

 Section 10901.9 of the Insurance Code is amended to read:

10901.9.
 Commencing January 1, 2001, premiums Premiums for health benefit plans offered, delivered, amended, or renewed by carriers shall be subject to the following requirements:
(a) The premium for new business for a federally eligible defined individual shall not exceed the following amounts:

(1)For health benefit plans identified in subdivision (d) of Section 10785 that offer services through a preferred provider arrangement, the average premium paid by a subscriber of the Major Risk Medical Insurance Program who is of the same age and resides in the same geographic area as the federally eligible defined individual. However, for federally qualified individuals who are between the ages of 60 to 64, inclusive, the premium shall not exceed the average premium paid by a subscriber of the Major Risk Medical Insurance Program who is 59 years of age and resides in the same geographic area as the federally eligible defined individual.

(2)For health benefit plans identified in subdivision (d) of Section 10785 that do not offer services through a preferred provider arrangement, 170 percent of the standard premium charged to an individual who is of the same age and resides in the same geographic area as the federally eligible defined individual. However, for federally qualified individuals who are between the ages of 60 to 64, inclusive, the premium shall not exceed 170 percent of the standard premium charged to an individual who is 59 years of age and resides in the same geographic area as the federally eligible defined individual.
(b) The premium for in force business for a federally eligible defined individual shall not exceed the following amounts:

(1)For health benefit plans identified in subdivision (d) of Section 10785 that offer services through a preferred provider arrangement, the average premium paid by a subscriber of the Major Risk Medical Insurance Program who is of the same age and resides in the same geographic area as the federally eligible defined individual. However, for federally qualified individuals who are between the ages of 60 and 64, inclusive, the premium shall not exceed the average premium paid by a subscriber of the Major Risk Medical Insurance Program who is 59 years of age and resides in the same geographic area as the federally eligible defined individual.

(2)For health benefit plans identified in subdivision (d) of Section 10785 that do not offer services through a preferred provider arrangement, 170 percent of the standard premium charged to an individual who is of the same age and resides in the same geographic area as the federally eligible defined individual. However, for federally qualified individuals who are between the ages of 60 and 64, inclusive, the premium shall not exceed 170 percent of the standard premium charged to an individual who is 59 years of age and resides in the same geographic area as the federally eligible defined individual. The premium effective on January 1, 2001, shall apply to in force business at the earlier of either the time of renewal or July 1, 2001.
(c) The premium applied to a federally eligible defined individual may not increase by more than the following amounts:

(1)For health benefit plans identified in subdivision (d) of Section 10785 that offer services through a preferred provider arrangement, the average increase in the premiums charged to a subscriber of the Major Risk Medical Insurance Program who is of the same age and resides in the same geographic area as the federally eligible defined individual.

(2)For health benefit plans identified in subdivision (d) of Section 10785 that do not offer services through a preferred provider arrangement

(1) Except as provided in paragraph (2), the increase in premiums charged to a nonfederally qualified individual who is of the same age and resides in the same geographic area as the federally defined eligible individual. The premium for an eligible individual may not be modified more frequently than every 12 months.
(2) For a contract that a carrier has discontinued offering, the premium applied to the first rating period of the new contract that the federally eligible defined individual elects to purchase shall be no greater than the premium applied in the prior rating period to the discontinued contract.

SEC. 12.SEC. 18.

 Section 12715.5 is added to the Insurance Code, to read:

12715.5.
 The board shall offer at least four different options for major risk medical coverage pursuant to this part, including at least one health savings account-compatible option. These options shall provide for both of the following:
(a) Varying deductibles ranging from five hundred dollars ($500) to two thousand five hundred dollars ($2,500) per person and one thousand dollars ($1,000) to four thousand dollars ($4,000) per family.
(b) Varying out-of-pocket maximums ranging from two thousand five hundred dollars ($2,500) to five thousand dollars ($5,000) per person and four thousand dollars ($4,000) to seven thousand five hundred dollars ($7,500) per family.

SEC. 13.SEC. 19.

 Section 12715.6 is added to the Insurance Code, to read:

12715.6.
 It is the intent of the Legislature to enact legislation allowing a deduction in connection with any health savings account-compatible option provided pursuant to Section 12715.5 in conformity with federal law. It is further the intent of the Legislature to enact legislation allowing the state to subsidize the health savings account option using a sliding scale based on income.

SEC. 14. SEC. 20.

 Section 12719 is added to the Insurance Code, to read:

12719.
 (a) Benefits that exceed one hundred fifty thousand dollars ($150,000) in a calendar year under the program for a subscriber, a subscriber’s enrolled dependent, or a dependent subscriber shall be excluded.
(b) Benefits that exceed one million dollars ($1,000,000) in a lifetime under the program for a subscriber, a subscriber’s enrolled dependent, or dependent subscriber shall be excluded.
(c) This section shall remain in effect only until January 1, 2014, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2014, deletes or extends that date.

SEC. 15.SEC. 21.

 Section 12721.5 is added to the Insurance Code, to read:

12721.5.
 It is the intent of the Legislature to enact legislation allowing the board to, until January 1, 2014, participate on a sliding scale based on income in deductible and out-of-pocket maximum reinsurance using products including, but not limited to, health reimbursement arrangements, critical insurance policies, and accident insurance policies.

SEC. 16. SEC. 22.

 Section 12724 is added to the Insurance Code, to read:

12724.
 (a) The board shall adopt regulations that allow participating health plans to incorporate wellness programs, case management services, and disease management services, and offer enrollee rewards based on health risk reduction. The regulations adopted by the board pursuant to this section shall remain in effect only until January 1, 2014.
(b) This section shall remain in effect only until January 1, 2014, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2014, deletes or extends that date.

SEC. 17.SEC. 23.

 Section 12725 of the Insurance Code is amended to read:

12725.
 (a) Each resident of the state meeting the eligibility criteria of this section and who is unable to secure adequate private health coverage is eligible to apply for major risk medical coverage through the program.
(b) To be eligible for enrollment in the program, an applicant shall have been rejected for health care coverage by at least three different private health plans or shall provide proof that he or she has a qualified medically uninsurable condition, as documented by a physician and surgeon. The board shall determine, by regulation, which conditions are qualified for purposes of this section. An applicant shall be deemed to have been rejected if the only private health coverage that the applicant could secure would do one of the following:
(1) Impose substantial waivers that the program determines would leave a subscriber without adequate coverage for medically necessary services.
(2) Afford limited coverage that the program determines would leave the subscriber without adequate coverage for medically necessary services.
(3) Afford coverage only at an excessive price, which the board determines is significantly above standard average individual coverage rates.
(c) Rejection for policies or certificates of specified disease or policies or certificates of hospital confinement indemnity, as described in Section 10198.61, shall not be deemed to be rejection for the purposes of eligibility for enrollment.
(d) The board may permit dependents of eligible subscribers to enroll in major risk medical coverage through the program if the board determines the enrollment can be carried out in an actuarially and administratively sound manner.
(e) Notwithstanding the provisions of this section, the board shall by regulation prescribe a period of time during which a resident is ineligible to apply for major risk medical coverage through the program if the resident either voluntarily disenrolls from, or was terminated for nonpayment of the premium from, a private health plan after enrolling in that private health plan pursuant to either Section 10127.15 or Section 1373.62 of the Health and Safety Code.
(f) For the period commencing September 1, 2003, to December 31, 2007, inclusive, subscribers and their dependents receiving major risk coverage through the program may receive that coverage for no more than 36 consecutive months. Ninety days before a subscriber or dependent’s eligibility ceases pursuant to this subdivision, the board shall provide the subscriber and any dependents with written notice of the termination date and written information concerning the right to purchase a standard benefit plan from any health care service plan or health insurer participating in the individual insurance market pursuant to Section 10127.15 or Section 1373.62 of the Health and Safety Code. This subdivision shall become inoperative on December 31, 2007.
(g) (1) For purposes of this section, “resident” means a person who meets one of the following requirements:
(A) Has resided continuously in the State of California for at least six months immediately prior to applying to the program.
(B) Is present in the State of California and provides documentation of recent participation in a high-risk health insurance program in another state.
(2) “Resident” includes a member of a federally recognized California Indian tribe who meets the requirements of subparagraph (A) or (B) of paragraph (1).

SEC. 18. SEC. 24.

 Section 12727 of the Insurance Code is amended to read:

12727.
 The program shall make available to applicants eligible to enroll in the program sufficient information to make an informed choice among the options provided pursuant to Section 12715.5. Each applicant shall be issued an appropriate document setting forth or summarizing the services to which an enrollee is entitled, procedures for obtaining major risk medical coverage, a list of contracting health plans and providers, and a summary of grievance procedures.

SEC. 19.SEC. 25.

 Section 12737.5 is added to the Insurance Code, to read:

(a) In addition to the risk categories described in Section 2698.400 of Title 10 of the California Code of Regulations, the board may, by regulation, develop risk categories based on morbid obesity and tobacco use. The risk categories developed pursuant to this section shall set objectives for the reduction of morbid obesity and tobacco use and shall allow for rate reductions if those objectives are achieved.

12737.5.
 (b) The regulations adopted by the board pursuant to this section shall remain in effect only until January 1, 2014.
(c) This section shall remain in effect only until January 1, 2014, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2014, deletes or extends that date.

SEC. 20.SEC. 26.

 Chapter 7.5 (commencing with Section 12738.1) is added to Part 6.5 of Division 2 of the Insurance Code, to read:
CHAPTER  7.5. Rider Pool

12738.1.
 (a) The board may create a rider pool consisting of applicants with no more than two qualifying conditions.
(b) The board shall issue documentation of membership to each member of the rider pool. This documentation shall identify the member’s qualifying condition or conditions.
(c) For purposes of this section, “qualifying condition” means a health condition that made the individual uninsurable in the private market, as determined by the board, and that the board determines, by regulation, is eligible for purposes of this section. “Qualifying condition” shall not include a condition likely to require chronic, ongoing care.

12738.2.
 This chapter shall remain in effect only until January 1, 2014, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2014, deletes or extends that date.

SEC. 21.SEC. 27.

 Section 12739 of the Insurance Code is amended to read:

12739.
 (a) (1) There is hereby created in the State Treasury a special fund known as the Major Risk Medical Insurance Fund that is, notwithstanding Section 13340 of the Government Code, continuously appropriated to the board for the purposes specified in Section 12739.1.
(2) Notwithstanding paragraph (1), funds deposited in the account pursuant to Section 1341.45 of the Health and Safety Code shall not be continuously appropriated.
(b) After June 30, 1991, the following amounts shall be deposited annually in the Major Risk Medical Insurance Fund:
(1) Eighteen Twenty-three million dollars ($18,000,000) ($23,000,000) from the Hospital Services Account in the Cigarette and Tobacco Products Surtax Fund.
(2) (A)Eleven Sixteen million dollars ($11,000,000) ($16,000,000) from the Physician Services Account in the Cigarette and Tobacco Products Surtax Fund.

(B)Notwithstanding subparagraph (A), for the 2007–08 fiscal year only, the Controller shall reduce the amount deposited into the Major Risk Medical Insurance Fund from the Physician Services Account in the Cigarette and Tobacco Products Surtax Fund to one million dollars ($1,000,000).

(3) One million dollars ($1,000,000) from the Unallocated Account in the Cigarette and Tobacco Products Surtax Fund.

SEC. 22.Section 12739.5 is added to the Insurance Code, to read:
12739.5.

It is the intent of the Legislature to enact legislation that would, until January 1, 2014, do all of the following:

(a)Place an assessment on health care service plans and health insurers, on a per covered life per month or total covered lives per year basis, that would supplement available program funding.

(b)Require the board to establish the anticipated program costs, the subscriber premium payments, and the level of assessments to be paid by health care service plans and health insurers pursuant to subdivision (a).

(c)Provide health care service plans and health insurers a tax deduction that would offset the assessments paid by the plans and insurers, as described in subdivision (a).

SEC. 28.

  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.