Article 3.17. Grandfathered Small Employer Plans of California Health And Safety Code >> Division 2. >> Chapter 2.2. >> Article 3.17.
As used in this article, the following definitions shall
apply:
(a) "Dependent" means the spouse or registered domestic partner,
or child, of an eligible employee, subject to applicable terms of the
health care service plan contract covering the employee, and
includes dependents of guaranteed association members if the
association elects to include dependents under its health coverage at
the same time it determines its membership composition pursuant to
subdivision (n).
(b) "Eligible employee" means either of the following:
(1) Any permanent employee who is actively engaged on a full-time
basis in the conduct of the business of the small employer with a
normal workweek of an average of 30 hours per week over the course of
a month, at the small employer's regular places of business, who has
met any statutorily authorized applicable waiting period
requirements. The term includes sole proprietors or partners of a
partnership, if they are actively engaged on a full-time basis in the
small employer's business and included as employees under a health
care service plan contract of a small employer, but does not include
employees who work on a part-time, temporary, or substitute basis. It
includes any eligible employee, as defined in this paragraph, who
obtains coverage through a guaranteed association. Employees of
employers purchasing through a guaranteed association shall be deemed
to be eligible employees if they would otherwise meet the definition
except for the number of persons employed by the employer. Permanent
employees who work at least 20 hours but not more than 29 hours are
deemed to be eligible employees if all four of the following apply:
(A) They otherwise meet the definition of an eligible employee
except for the number of hours worked.
(B) The employer offers the employees health coverage under a
health benefit plan.
(C) All similarly situated individuals are offered coverage under
the health benefit plan.
(D) The employee must have worked at least 20 hours per normal
workweek for at least 50 percent of the weeks in the previous
calendar quarter. The health care service plan may request any
necessary information to document the hours and time period in
question, including, but not limited to, payroll records and employee
wage and tax filings.
(2) Any member of a guaranteed association as defined in
subdivision (n).
(c) "In force business" means an existing health benefit plan
contract issued by the plan to a small employer.
(d) "Late enrollee" means an eligible employee or dependent who
has declined enrollment in a health benefit plan offered by a small
employer at the time of the initial enrollment period provided under
the terms of the health benefit plan and who subsequently requests
enrollment in a health benefit plan of that small employer, provided
that the initial enrollment period shall be a period of at least 30
days. It also means any member of an association that is a guaranteed
association as well as any other person eligible to purchase through
the guaranteed association when that person has failed to purchase
coverage during the initial enrollment period provided under the
terms of the guaranteed association's plan contract and who
subsequently requests enrollment in the plan, provided that the
initial enrollment period shall be a period of at least 30 days.
However, an eligible employee, any other person eligible for coverage
through a guaranteed association pursuant to subdivision (n), or an
eligible dependent shall not be considered a late enrollee if any of
the following is applicable:
(1) The individual meets all of the following requirements:
(A) He or she was covered under another employer health benefit
plan, the Healthy Families Program, the Access for Infants and
Mothers (AIM) Program, the Medi-Cal program, or coverage through the
California Health Benefit Exchange at the time the individual was
eligible to enroll.
(B) He or she certified at the time of the initial enrollment that
coverage under another employer health benefit plan, the Healthy
Families Program, the AIM Program, the Medi-Cal program, or coverage
through the California Health Benefit Exchange was the reason for
declining enrollment, provided that, if the individual was covered
under another employer health benefit plan, including a plan offered
through the California Health Benefit Exchange, the individual was
given the opportunity to make the certification required by this
subdivision and was notified that failure to do so could result in
later treatment as a late enrollee.
(C) He or she has lost or will lose coverage under another
employer health benefit plan as a result of termination of employment
of the individual or of a person through whom the individual was
covered as a dependent, change in employment status of the individual
or of a person through whom the individual was covered as a
dependent, termination of the other plan's coverage, cessation of an
employer's contribution toward an employee's or dependent's coverage,
death of the person through whom the individual was covered as a
dependent, legal separation, or divorce; or he or she has lost or
will lose coverage under the Healthy Families Program, the AIM
Program, the Medi-Cal program, or coverage through the California
Health Benefit Exchange.
(D) He or she requests enrollment within 30 days after termination
of coverage or employer contribution toward coverage provided under
another employer health benefit plan, or requests enrollment within
60 days after termination of Medi-Cal program coverage, AIM Program
coverage, Healthy Families Program coverage, or coverage through the
California Health Benefit Exchange.
(2) The employer offers multiple health benefit plans and the
employee elects a different plan during an open enrollment period.
(3) A court has ordered that coverage be provided for a spouse or
minor child under a covered employee's health benefit plan.
(4) (A) In the case of an eligible employee, as defined in
paragraph (1) of subdivision (b), the plan cannot produce a written
statement from the employer stating that the individual or the person
through whom the individual was eligible to be covered as a
dependent, prior to declining coverage, was provided with, and
signed, acknowledgment of an explicit written notice in boldface type
specifying that failure to elect coverage during the initial
enrollment period permits the plan to impose, at the time of the
individual's later decision to elect coverage, an exclusion from
eligibility for coverage until the next open enrollment period,
unless the individual meets the criteria specified in paragraph (1),
(2), or (3). This exclusion from eligibility for coverage shall not
be considered a waiting period in violation of Section 1357.51 or
1357.607.
(B) In the case of an association member who did not purchase
coverage through a guaranteed association, the plan cannot produce a
written statement from the association stating that the association
sent a written notice in boldface type to all potentially eligible
association members at their last known address prior to the initial
enrollment period informing members that failure to elect coverage
during the initial enrollment period permits the plan to impose, at
the time of the member's later decision to elect coverage, an
exclusion from eligibility for coverage until the next open
enrollment period, unless the individual meets the requirements of
subparagraphs (A), (C), and (D) of paragraph (1) or meets the
requirements of paragraph (2) or (3). This exclusion from eligibility
for coverage shall not be considered a waiting period in violation
of Section 1357.51 or 1357.607.
(C) In the case of an employer or person who is not a member of an
association, was eligible to purchase coverage through a guaranteed
association, and did not do so, and would not be eligible to purchase
guaranteed coverage unless purchased through a guaranteed
association, the employer or person can demonstrate that he or she
meets the requirements of subparagraphs (A), (C), and (D) of
paragraph (1), or meets the requirements of paragraph (2) or (3), or
that he or she recently had a change in status that would make him or
her eligible and that application for enrollment was made within 30
days of the change.
(5) The individual is an employee or dependent who meets the
criteria described in paragraph (1) and was under a COBRA
continuation provision and the coverage under that provision has been
exhausted. For purposes of this section, the definition of "COBRA"
set forth in subdivision (e) of Section 1373.621 shall apply.
(6) The individual is a dependent of an enrolled eligible employee
who has lost or will lose his or her coverage under the Healthy
Families Program, the AIM Program, the Medi-Cal program, or a health
benefit plan offered through the California Health Benefit Exchange
and requests enrollment within 60 days after termination of that
coverage.
(7) The individual is an eligible employee who previously declined
coverage under an employer health benefit plan, including a plan
offered through the California Health Benefit Exchange, and who has
subsequently acquired a dependent who would be eligible for coverage
as a dependent of the employee through marriage, birth, adoption, or
placement for adoption, and who enrolls for coverage under that
employer health benefit plan on his or her behalf and on behalf of
his or her dependent within 30 days following the date of marriage,
birth, adoption, or placement for adoption, in which case the
effective date of coverage shall be the first day of the month
following the date the completed request for enrollment is received
in the case of marriage, or the date of birth, or the date of
adoption or placement for adoption, whichever applies. Notice of the
special enrollment rights contained in this paragraph shall be
provided by the employer to an employee at or before the time the
employee is offered an opportunity to enroll in plan coverage.
(8) The individual is an eligible employee who has declined
coverage for himself or herself or his or her dependents during a
previous enrollment period because his or her dependents were covered
by another employer health benefit plan, including a plan offered
through the California Health Benefit Exchange, at the time of the
previous enrollment period. That individual may enroll himself or
herself or his or her dependents for plan coverage during a special
open enrollment opportunity if his or her dependents have lost or
will lose coverage under that other employer health benefit plan. The
special open enrollment opportunity shall be requested by the
employee not more than 30 days after the date that the other health
coverage is exhausted or terminated. Upon enrollment, coverage shall
be effective not later than the first day of the first calendar month
beginning after the date the request for enrollment is received.
Notice of the special enrollment rights contained in this paragraph
shall be provided by the employer to an employee at or before the
time the employee is offered an opportunity to enroll in plan
coverage.
(e) "Preexisting condition provision" means a contract provision
that excludes coverage for charges or expenses incurred during a
specified period following the enrollee's effective date of coverage,
as to a condition for which medical advice, diagnosis, care, or
treatment was recommended or received during a specified period
immediately preceding the effective date of coverage. No health care
service plan shall limit or exclude coverage for any individual based
on a preexisting condition whether or not any medical advice,
diagnosis, care, or treatment was recommended or received before that
date.
(f) "Creditable coverage" means:
(1) Any individual or group policy, contract, or program that is
written or administered by a disability insurer, health care service
plan, fraternal benefits society, self-insured employer plan, or any
other entity, in this state or elsewhere, and that arranges or
provides medical, hospital, and surgical coverage not designed to
supplement other private or governmental plans. The term includes
continuation or conversion coverage but does not include accident
only, credit, coverage for onsite medical clinics, disability income,
Medicare supplement, long-term care, dental, vision, coverage issued
as a supplement to liability insurance, insurance arising out of a
workers' compensation or similar law, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
(2) The Medicare Program pursuant to Title XVIII of the federal
Social Security Act (42 U.S.C. Sec. 1395 et seq.).
(3) The Medicaid Program pursuant to Title XIX of the federal
Social Security Act (42 U.S.C. Sec. 1396 et seq.).
(4) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
(5) 10 U.S.C. Chapter 55 (commencing with Section 1071) (Civilian
Health and Medical Program of the Uniformed Services (CHAMPUS)).
(6) A medical care program of the Indian Health Service or of a
tribal organization.
(7) A health plan offered under 5 U.S.C. Chapter 89 (commencing
with Section 8901) (Federal Employees Health Benefits Program
(FEHBP)).
(8) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)(I) of the Public Health Service Act,
as amended by Public Law 104-191, the Health Insurance Portability
and Accountability Act of 1996.
(9) A health benefit plan under Section 5(e) of the Peace Corps
Act (22 U.S.C. Sec. 2504(e)).
(10) Any other creditable coverage as defined by subsection (c) of
Section 2704 of Title XXVII of the federal Public Health Service Act
(42 U.S.C. Sec. 300gg-3(c)).
(g) "Rating period" means the period for which premium rates
established by a plan are in effect and shall be no less than 12
months from the date of issuance or renewal of the health care
service plan contract.
(h) "Risk adjusted employee risk rate" means the rate determined
for an eligible employee of a small employer in a particular risk
category after applying the risk adjustment factor.
(i) "Risk adjustment factor" means the percentage adjustment to be
applied equally to each standard employee risk rate for a particular
small employer, based upon any expected deviations from standard
cost of services. This factor may not be more than 110 percent or
less than 90 percent.
(j) "Risk category" means the following characteristics of an
eligible employee: age, geographic region, and family composition of
the employee, plus the health benefit plan selected by the small
employer.
(1) No more than the following age categories may be used in
determining premium rates:
Under 30
30-39
40-49
50-54
55-59
60-64
65 and over
However, for the 65 and over age category, separate premium rates
may be specified depending upon whether coverage under the plan
contract will be primary or secondary to benefits provided by the
Medicare Program pursuant to Title XVIII of the federal Social
Security Act (42 U.S.C. Sec. 1395 et seq.).
(2) Small employer health care service plans shall base rates to
small employers using no more than the following family size
categories:
(A) Single.
(B) Married couple or registered domestic partners.
(C) One adult and child or children.
(D) Married couple or registered domestic partners and child or
children.
(3) (A) In determining rates for small employers, a plan that
operates statewide shall use no more than nine geographic regions in
the state, have no region smaller than an area in which the first
three digits of all its ZIP Codes are in common within a county, and
divide no county into more than two regions. Plans shall be deemed to
be operating statewide if their coverage area includes 90 percent or
more of the state's population. Geographic regions established
pursuant to this section shall, as a group, cover the entire state,
and the area encompassed in a geographic region shall be separate and
distinct from areas encompassed in other geographic regions.
Geographic regions may be noncontiguous.
(B) (i) In determining rates for small employers, a plan that does
not operate statewide shall use no more than the number of
geographic regions in the state that is determined by the following
formula: the population, as determined in the last federal census, of
all counties that are included in their entirety in a plan's service
area divided by the total population of the state, as determined in
the last federal census, multiplied by nine. The resulting number
shall be rounded to the nearest whole integer. No region may be
smaller than an area in which the first three digits of all its ZIP
Codes are in common within a county and no county may be divided into
more than two regions. The area encompassed in a geographic region
shall be separate and distinct from areas encompassed in other
geographic regions. Geographic regions may be noncontiguous. No plan
shall have less than one geographic area.
(ii) If the formula in clause (i) results in a plan that operates
in more than one county having only one geographic region, then the
formula in clause (i) shall not apply and the plan may have two
geographic regions, provided that no county is divided into more than
one region.
Nothing in this section shall be construed to require a plan to
establish a new service area or to offer health coverage on a
statewide basis, outside of the plan's existing service area.
(k) (1) "Small employer" means any of the following:
(A) For plan years commencing on or after January 1, 2014, and on
or before December 31, 2015, any person, firm, proprietary or
nonprofit corporation, partnership, public agency, or association
that is actively engaged in business or service, that, on at least 50
percent of its working days during the preceding calendar quarter or
preceding calendar year, employed at least one, but no more than 50,
eligible employees, the majority of whom were employed within this
state, that was not formed primarily for purposes of buying health
care service plan contracts, and in which a bona fide
employer-employee relationship exists. For plan years commencing on
or after January 1, 2016, any person, firm, proprietary or nonprofit
corporation, partnership, public agency, or association that is
actively engaged in business or service, that, on at least 50 percent
of its working days during the preceding calendar quarter or
preceding calendar year, employed at least one, but no more than 100,
eligible employees, the majority of whom were employed within this
state, that was not formed primarily for purposes of buying health
care service plan contracts, and in which a bona fide
employer-employee relationship exists. In determining whether to
apply the calendar quarter or calendar year test, a health care
service plan shall use the test that ensures eligibility if only one
test would establish eligibility. In determining the number of
eligible employees, companies that are affiliated companies and that
are eligible to file a combined tax return for purposes of state
taxation shall be considered one employer. Subsequent to the issuance
of a health care service plan contract to a small employer pursuant
to this article, and for the purpose of determining eligibility, the
size of a small employer shall be determined annually. Except as
otherwise specifically provided in this article, provisions of this
article that apply to a small employer shall continue to apply until
the plan contract anniversary following the date the employer no
longer meets the requirements of this definition. It includes any
small employer as defined in this subparagraph who purchases coverage
through a guaranteed association, and any employer purchasing
coverage for employees through a guaranteed association. This
subparagraph shall be implemented to the extent consistent with
PPACA, except that the minimum requirement of one employee shall be
implemented only to the extent required by PPACA.
(B) Any guaranteed association, as defined in subdivision (m),
that purchases health coverage for members of the association.
(2) For plan years commencing on or after January 1, 2014, the
definition of an employer, for purposes of determining whether an
employer with one employee shall include sole proprietors, certain
owners of "S" corporations, or other individuals, shall be consistent
with Section 1304 of PPACA.
(l) "Standard employee risk rate" means the rate applicable to an
eligible employee in a particular risk category in a small employer
group.
(m) "Guaranteed association" means a nonprofit organization
comprised of a group of individuals or employers who associate based
solely on participation in a specified profession or industry,
accepting for membership any individual or employer meeting its
membership criteria, and that (1) includes one or more small
employers as defined in subparagraph (A) of paragraph (1) of
subdivision (k), (2) does not condition membership directly or
indirectly on the health or claims history of any person, (3) uses
membership dues solely for and in consideration of the membership and
membership benefits, except that the amount of the dues shall not
depend on whether the member applies for or purchases insurance
offered to the association, (4) is organized and maintained in good
faith for purposes unrelated to insurance, (5) has been in active
existence on January 1, 1992, and for at least five years prior to
that date, (6) has included health insurance as a membership benefit
for at least five years prior to January 1, 1992, (7) has a
constitution and bylaws, or other analogous governing documents that
provide for election of the governing board of the association by its
members, (8) offers any plan contract that is purchased to all
individual members and employer members in this state, (9) includes
any member choosing to enroll in the plan contracts offered to the
association provided that the member has agreed to make the required
premium payments, and (10) covers at least 1,000 persons with the
health care service plan with which it contracts. The requirement of
1,000 persons may be met if component chapters of a statewide
association contracting separately with the same carrier cover at
least 1,000 persons in the aggregate.
This subdivision applies regardless of whether a contract issued
by a plan is with an association, or a trust formed for or sponsored
by an association, to administer benefits for association members.
For purposes of this subdivision, an association formed by a
merger of two or more associations after January 1, 1992, and
otherwise meeting the criteria of this subdivision shall be deemed to
have been in active existence on January 1, 1992, if its predecessor
organizations had been in active existence on January 1, 1992, and
for at least five years prior to that date and otherwise met the
criteria of this subdivision.
(n) "Members of a guaranteed association" means any individual or
employer meeting the association's membership criteria if that person
is a member of the association and chooses to purchase health
coverage through the association. At the association's discretion, it
also may include employees of association members, association
staff, retired members, retired employees of members, and surviving
spouses and dependents of deceased members. However, if an
association chooses to include these persons as members of the
guaranteed association, the association shall make that election in
advance of purchasing a plan contract. Health care service plans may
require an association to adhere to the membership composition it
selects for up to 12 months.
(o) "Affiliation period" means a period that, under the terms of
the health care service plan contract, must expire before health care
services under the contract become effective.
(p) "Grandfathered small employer health care service plan
contract" means a small employer health care service plan contract
that constitutes a grandfathered health plan.
(q) "Grandfathered health plan" has the meaning set forth in
Section 1251 of PPACA.
(r) "Nongrandfathered small employer health care service plan
contract" means a small employer health care service plan contract
that is not a grandfathered health plan.
(s) "Plan year" has the meaning set forth in Section 144.103 of
Title 45 of the Code of Federal Regulations.
(t) "PPACA" means the federal Patient Protection and Affordable
Care Act (Public Law 111-148), as amended by the federal Health Care
and Education Reconciliation Act of 2010 (Public Law 111-152), and
any rules, regulations, or guidance issued thereunder.
(u) "Registered domestic partner" means a person who has
established a domestic partnership as described in Section 297 of the
Family Code.
(v) "Small employer health care service plan contract" means a
health care service plan contract issued to a small employer.
(w) "Waiting period" means a period that is required to pass with
respect to an employee before the employee is eligible to be covered
for benefits under the terms of the contract.
This article shall apply only to grandfathered small
group health care service plan contracts and only with respect to
plan years commencing on or after January 1, 2014.
(a) A health care service plan providing or arranging for
the provision of basic health care services to small employers shall
be subject to this article if either of the following conditions are
met:
(1) Any portion of the premium is paid by a small employer, or any
covered individual is reimbursed, whether through wage adjustments
or otherwise, by a small employer for any portion of the premium.
(2) The plan contract is treated by the small employer or any of
the covered individuals as part of a plan or program for the purposes
of Section 106 or 162 of the Internal Revenue Code.
(b) This article shall not apply to health care service plan
contracts for coverage of Medicare services pursuant to contracts
with the United States government, Medicare supplement, Medi-Cal
contracts with the State Department of Health Care Services,
long-term care coverage, or specialized health care service plan
contracts.
Nothing in this article shall be construed to preclude
the application of this chapter to either of the following:
(a) An association, trust, or other organization acting as a
"health care service plan" as defined under Section 1345.
(b) An association, trust, or other organization or person
presenting information regarding a health care service plan to
persons who may be interested in subscribing or enrolling in the
plan.
(a) (1) A plan shall fairly and affirmatively renew a
grandfathered health plan contract with a small employer.
(2) Each plan shall make available to each small employer all
nongrandfathered small employer health care service plan contracts
that the plan offers and sells to small employers or to associations
that include small employers in this state consistent with Article
3.1 (commencing with Section 1357).
(3) No plan or solicitor shall induce or otherwise encourage a
small employer to separate or otherwise exclude an eligible employee
from a health care service plan contract that is provided in
connection with the employee's employment or membership in a
guaranteed association.
(b) Every plan shall file with the director the reasonable
employee participation requirements and employer contribution
requirements that will be applied in renewing its grandfathered
health care service plan contracts. Participation requirements shall
be applied uniformly among all small employer groups, except that a
plan may vary application of minimum employee participation
requirements by the size of the small employer group and whether the
employer contributes 100 percent of the eligible employee's premium.
Employer contribution requirements shall not vary by employer size. A
health care service plan shall not establish a participation
requirement that (1) requires a person who meets the definition of a
dependent in subdivision (a) of Section 1357.600 to enroll as a
dependent if he or she is otherwise eligible for coverage and wishes
to enroll as an eligible employee and (2) allows a plan to reject an
otherwise eligible small employer because of the number of persons
that waive coverage due to coverage through another employer. Members
of an association eligible for health coverage under subdivision (n)
of Section 1357.600, but not electing any health coverage through
the association, shall not be counted as eligible employees for
purposes of determining whether the guaranteed association meets a
plan's reasonable participation standards.
(c) No plan or solicitor shall, directly or indirectly, engage in
the following activities:
(1) Encourage or direct small employers to refrain from filing an
application for coverage or renewal of coverage with a plan because
of the health status, claims experience, industry, occupation of the
small employer, or geographic location provided that it is within the
plan's approved service area.
(2) Encourage or direct small employers to seek coverage from
another plan, or coverage offered through the California Health
Benefit Exchange, because of the health status, claims experience,
industry, occupation of the small employer, or geographic location
provided that it is within the plan's approved service area.
(d) A plan shall not, directly or indirectly, enter into any
contract, agreement, or arrangement with a solicitor that provides
for or results in the compensation paid to a solicitor for the sale
of a health care service plan contract to be varied because of the
health status, claims experience, industry, occupation, or geographic
location of the small employer. This subdivision does not apply to a
compensation arrangement that provides compensation to a solicitor
on the basis of percentage of premium, provided that the percentage
shall not vary because of the health status, claims experience,
industry, occupation, or geographic area of the small employer or
small employer's employees.
(e) A policy or contract that covers a small employer, as defined
in Section 1304(b) of PPACA and in subdivision (k) of Section
1357.600 shall not establish rules for eligibility, including
continued eligibility, of an individual, or dependent of an
individual, to enroll under the terms of the plan based on any of the
following health status-related factors:
(1) Health status.
(2) Medical condition, including physical and mental illnesses.
(3) Claims experience.
(4) Receipt of health care.
(5) Medical history.
(6) Genetic information.
(7) Evidence of insurability, including conditions arising out of
acts of domestic violence.
(8) Disability.
(9) Any other health status-related factor as determined by any
federal regulations, rules, or guidance issued pursuant to Section
2705 of the federal Public Health Service Act.
(f) A plan shall comply with the requirements of Section 1374.3.
(a) For plan contracts expiring after July 1, 1994, 60
days prior to July 1, 1994, an association that meets the definition
of a guaranteed association, as set forth in Section 1357.600, except
for the requirement that 1,000 persons be covered, shall be entitled
to renew grandfathered small employer health care service plan
contracts as if the association were a guaranteed association, except
that the coverage shall be guaranteed only for those members of an
association, as defined in Section 1357.600, (1) who were receiving
coverage or had successfully applied for coverage through the
association as of June 30, 1993, (2) who were receiving coverage
through the association as of December 31, 1992, and whose coverage
lapsed at any time thereafter because the employment through which
coverage was received ended or an employer's contribution to health
coverage ended, or (3) who were covered at any time between June 30,
1993, and July 1, 1994, under a contract that was in force on June
30, 1993.
(b) An association obtaining health coverage for its members
pursuant to this section shall otherwise be afforded all the rights
of a guaranteed association under this chapter, including, but not
limited to, guaranteed renewability of coverage.
A small employer health care service plan contract shall
not impose a preexisting condition provision or a waiting or
affiliation period upon any individual.
Nothing in this article shall be construed as prohibiting
a health care service plan from restricting enrollment of late
enrollees to open enrollment periods consistent with federal law.
All grandfathered small employer health care service plan
contracts shall provide to subscribers and enrollees at least all of
the basic health care services included in subdivision (b) of
Section 1345, and in Section 1300.67 of the California Code of
Regulations.
(a) No plan shall be required by the provisions of this
article:
(1) To offer coverage under a small employer's health care service
plan contract to an otherwise eligible employee or dependent, when
the eligible employee or dependent does not work or reside within the
plan's approved service area, except as provided in Chapter 7
(commencing with Section 3750) of Part 1 of Division 9 of the Family
Code.
(2) To offer coverage under a small employer's health care service
plan contract to an eligible employee, as defined in paragraph (2)
of subdivision (b) of Section 1357.600, who within 12 months of
application for coverage terminated from a small employer health care
service plan contract offered by the plan.
(b) Nothing in this article shall be construed to limit the
director's authority to develop and implement a plan of
rehabilitation for a health care service plan whose financial
viability or organizational and administrative capacity has become
impaired.
(a) The director may require a plan to discontinue the
renewal of grandfathered small employer health care service plan
contracts or the offering or acceptance of applications from any
group upon a determination by the director that the plan does not
have sufficient financial viability, or organizational and
administrative capacity to ensure the delivery of health care
services to its enrollees. In determining whether the conditions of
this section have been met, the director shall consider, but not be
limited to, the plan's compliance with the requirements of Section
1367, Article 6 (commencing with Section 1375), and the rules adopted
thereunder.
(b) Nothing in this article shall be construed to limit the
director's authority to develop and implement a plan of
rehabilitation for a health care service plan whose financial
viability or organizational and administrative capacity has become
impaired.
Premiums for grandfathered contracts renewed by plans on
or after January 1, 2014, shall be subject to the following
requirements:
(a) (1) The premium for in force business shall be determined for
an eligible employee in a particular risk category after applying a
risk adjustment factor to the plan's standard employee risk rates.
The risk adjusted employee risk rates may not be more than 110
percent or less than 90 percent. The risk adjustment factor applied
to a small employer may not increase by more than 10 percentage
points from the risk adjustment factor applied in the prior rating
period. The risk adjustment factor for a small employer may not be
modified more frequently than every 12 months.
(2) The premium charged a small employer for in force business
shall be equal to the sum of the risk adjusted employee risk rates.
The standard employee risk rates shall be in effect for no less than
12 months.
(b) (1) For any small employer, a plan may, with the consent of
the small employer, establish composite employee and dependent rates
for renewal of in force business. The composite rates shall be
determined as the average of the risk adjusted employee risk rates
for the small employer, as determined in accordance with the
requirements of subdivision (a). The sum of the composite rates so
determined shall be equal to the sum of the risk adjusted employee
risk rates for the small employer.
(2) The composite rates shall be used for all employees and
dependents covered throughout a rating period of 12 months, except
that a plan may reserve the right to redetermine the composite rates
if the enrollment under the contract changes by more than a specified
percentage during the rating period. Any redetermination of the
composite rates shall be based on the same risk adjusted employee
risk rates used to determine the initial composite rates for the
rating period. If a plan reserves the right to redetermine the rates
and the enrollment changes more than the specified percentage, the
plan shall redetermine the composite rates if the redetermined rates
would result in a lower premium for the small employer. A plan
reserving the right to redetermine the composite rates based upon a
change in enrollment shall use the same specified percentage to
measure that change with respect to all small employers electing
composite rates.
Plans shall apply standard employee risk rates
consistently with respect to all small employers.
In connection with the renewal of a grandfathered small
employer health care service plan contract, each plan shall make a
reasonable disclosure, as part of its solicitation and sales
materials, of the following:
(a) The extent to which premium rates for a specified small
employer are established or adjusted in part based upon the actual or
expected variation in service costs of the employees and dependents
of the small employer.
(b) The provisions concerning the plan's right to change premium
rates and the factors other than provision of services experience
that affect changes in premium rates.
(c) Provisions relating to the guaranteed issue and renewal of
contracts.
(d) Provisions relating to the effect of any waiting or
affiliation provision.
(e) Provisions relating to the small employer's right to apply for
any nongrandfathered small employer health care service plan
contract written, issued, or administered by the plan at the time of
application for a new health care service plan contract, or at the
time of renewal of a health care service plan contract, consistent
with the requirements of PPACA.
(f) The availability, upon request, of a listing of all the plan's
nongrandfathered small employer health care service plan contracts
and benefit plan designs offered, both inside and outside the
California Health Benefit Exchange, including the rates for each
contract.
(g) At the time it renews a grandfathered small employer health
care service plan contract, each plan shall provide the small
employer with a statement of all of its nongrandfathered small
employer health care service plan contracts, including the rates for
each plan contract, in the service area in which the employer's
employees and eligible dependents who are to be covered by the plan
contract work or reside. For purposes of this subdivision, plans that
are affiliated plans or that are eligible to file a consolidated
income tax return shall be treated as one health plan.
(h) Each plan shall do all of the following:
(1) Prepare a brochure that summarizes all of its small employer
health care service plan contracts and to make this summary available
to any small employer and to solicitors upon request. The summary
shall include for each contract information on benefits provided, a
generic description of the manner in which services are provided,
such as how access to providers is limited, benefit limitations,
required copayments and deductibles, standard employee risk rates,
and a telephone number that can be called for more detailed benefit
information. Plans are required to keep the information contained in
the brochure accurate and up to date and, upon updating the brochure,
send copies to solicitors and solicitor firms with which the plan
contracts to solicit enrollments or subscriptions.
(2) For each contract, prepare a more detailed evidence of
coverage and make it available to small employers, solicitors, and
solicitor firms upon request. The evidence of coverage shall contain
all information that a prudent buyer would need to be aware of in
making contract selections.
(3) Provide to small employers and solicitors, upon request, for
any given small employer the sum of the standard employee risk rates
and the sum of the risk adjusted employee risk rates. When requesting
this information, small employers, solicitors, and solicitor firms
shall provide the plan with the information the plan needs to
determine the small employer's risk adjusted employee risk rate.
(4) Provide copies of the current summary brochure to all
solicitors and solicitor firms contracting with the plan to solicit
enrollments or subscriptions from small employers.
For purposes of this subdivision, plans that are affiliated plans
or that are eligible to file a consolidated income tax return shall
be treated as one health plan.
(a) At least 20 business days prior to renewing or
amending a small employer health care service plan contract subject
to this article, a plan shall file a notice of material modification
with the director in accordance with the provisions of Section 1352.
The notice of material modification shall include a statement
certifying that the plan is in compliance with subdivision (i) of
Section 1357.600 and Section 1357.612. The certified statement shall
set forth the standard employee risk rate for each risk category and
the highest and lowest risk adjustment factors that will be used in
setting the rates at which the contract will be renewed or amended.
Any action by the director, as permitted under Section 1352, to
disapprove, suspend, or postpone the plan's use of a plan contract
shall be in writing, specifying the reasons that the plan contract
does not comply with the requirements of this chapter.
(b) Prior to making any changes in the risk categories, risk
adjustment factors or standard employee risk rates filed with the
director pursuant to subdivision (a), the plan shall file as an
amendment a statement setting forth the changes and certifying that
the plan is in compliance with subdivision (i) of Section 1357.600
and Section 1357.612. A plan may commence utilizing the changed risk
categories set forth in the certified statement on the 31st day from
the date of the filing, or at an earlier time determined by the
director, unless the director disapproves the amendment by written
notice, stating the reasons therefor. If only the standard employee
risk rate is being changed, and not the risk categories or risk
adjustment factors, a plan may commence utilizing the changed
standard employee risk rate upon filing the certified statement
unless the director disapproves the amendment by written notice.
(c) Periodic changes to the standard employee risk rate that a
plan proposes to implement over the course of up to 12 consecutive
months may be filed in conjunction with the certified statement filed
under subdivision (a) or (b).
(d) Each plan shall maintain at its principal place of business
all of the information required to be filed with the director
pursuant to this section.
(e) Each plan shall make available to the director, on request,
the risk adjustment factor used in determining the rate for any
particular small employer.
(f) Nothing in this section shall be construed to limit the
director's authority to enforce the rating practices set forth in
this article.
(a) Health care service plans may enter into contractual
agreements with qualified associations, as defined in subdivision
(b), under which these qualified associations may assume
responsibility for performing specific administrative services, as
defined in this section, for qualified association members. Health
care service plans that enter into agreements with qualified
associations for assumption of administrative services shall
establish uniform definitions for the administrative services that
may be provided by a qualified association or its third-party
administrator. The health care service plan shall permit all
qualified associations to assume one or more of these functions when
the health care service plan determines the qualified association
demonstrates the administrative capacity to assume these functions.
For the purposes of this section, administrative services provided
by qualified associations or their third-party administrators shall
be services pertaining to eligibility determination, enrollment,
premium collection, sales, or claims administration on a per-claim
basis that would otherwise be provided directly by the health care
service plan or through a third-party administrator on a commission
basis or an agent or solicitor workforce on a commission basis.
Each health care service plan that enters into an agreement with
any qualified association for the provision of administrative
services shall offer all qualified associations with which it
contracts the same premium discounts for performing those services
the health care service plan has permitted the qualified association
or its third-party administrator to assume. The health care service
plan shall apply these uniform discounts to the health care service
plan's risk adjusted employee risk rates after the health plan has
determined the qualified association's risk adjusted employee risk
rates pursuant to Section 1357.612. The health care service plan
shall report to the department its schedule of discounts for each
administrative service.
In no instance may a health care service plan provide discounts to
qualified associations that are in any way intended to, or
materially result in, a reduction in premium charges to the qualified
association due to the health status of the membership of the
qualified association. In addition to any other remedies available to
the director to enforce this chapter, the director may declare a
contract between a health care service plan and a qualified
association for administrative services pursuant to this section null
and void if the director determines any discounts provided to the
qualified association are intended to, or materially result in, a
reduction in premium charges to the qualified association due to the
health status of the membership of the qualified association.
(b) For the purposes of this section, a qualified association is a
nonprofit corporation comprised of a group of individuals or
employers who associate based solely on participation in a specified
profession or industry, that conforms to all of the following
requirements:
(1) It accepts for membership any individual or small employer
meeting its membership criteria.
(2) It does not condition membership directly or indirectly on the
health or claims history of any person.
(3) It uses membership dues solely for and in consideration of the
membership and membership benefits, except that the amount of the
dues shall not depend on whether the member applies for or purchases
insurance offered by the association.
(4) It is organized and maintained in good faith for purposes
unrelated to insurance.
(5) It existed on January 1, 1972, and has been in continuous
existence since that date.
(6) It has a constitution and bylaws or other analogous governing
documents that provide for election of the governing board of the
association by its members.
(7) It offered, marketed, or sold health coverage to its members
for 20 continuous years prior to January 1, 1993.
(8) It agrees to offer only to association members any plan
contract.
(9) It agrees to include any member choosing to enroll in the plan
contract offered by the association, provided that the member agrees
to make required premium payments.
(10) It complies with all provisions of this article.
(11) It had at least 10,000 enrollees covered by association
sponsored plans immediately prior to enactment of Chapter 1128 of the
Statutes of 1992.
(12) It applies any administrative cost at an equal rate to all
members purchasing coverage through the qualified association.
(c) A qualified association shall comply with Section 1357.52.
(a) The department may adopt emergency regulations
implementing this article no later than August 31, 2013. The
department may readopt any emergency regulation authorized by this
section that is the same as or substantially equivalent to an
emergency regulation previously adopted under this section.
(b) The initial adoption of emergency regulations implementing
this section and the one readoption of emergency regulations
authorized by this section shall be deemed an emergency and necessary
for the immediate preservation of the public peace, health, safety,
or general welfare. The initial emergency regulations and the one
readoption of emergency regulations authorized by this section shall
be submitted to the Office of Administrative Law for filing with the
Secretary of State and each shall remain in effect for no more than
180 days, by which time final regulations may be adopted.