1357.600
. 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.