Article 2. Small Employer Carrier Requirements of California Insurance Code >> Division 2. >> Part 2. >> Chapter 8.01. >> Article 2.
(a) This chapter shall apply only to nongrandfathered
health benefit plans and only with respect to plan years commencing
on or after January 1, 2014.
(b) All carriers writing, issuing, or administering health benefit
plans that cover employees of small employers shall be subject to
this chapter if any one of the following conditions are met:
(1) Any portion of the premium for any health benefit plan or
benefits 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 health benefit plan 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.
Any person or entity subject to the requirements of
this chapter shall comply with the standards set forth in Chapter 7
(commencing with Section 3750) of Part 1 of Division 9 of the Family
Code and Section 14124.94 of the Welfare and Institutions Code.
The commissioner shall have the authority to determine
whether a health benefit plan is covered by this chapter, and to
determine whether an employer is a small employer within the meaning
of Section 10753.
The commissioner may issue regulations that are necessary
to carry out the purposes of this chapter.
(a) No group or individual policy or contract or
certificate of group insurance or statement of group coverage
providing benefits to employees of small employers as defined in this
chapter shall be issued or delivered by a carrier subject to the
jurisdiction of the commissioner regardless of the situs of the
contract or master policyholder or of the domicile of the carrier
nor, except as otherwise provided in Sections 10270.91 and 10270.92,
shall a carrier provide coverage subject to this chapter until a copy
of the form of the policy, contract, certificate, or statement of
coverage is filed with and approved by the commissioner in accordance
with Sections 10290 and 10291, and the carrier has complied with the
requirements of Section 10753.17.
(b) (1) On and after October 1, 2013, each carrier shall fairly
and affirmatively offer, market, and sell all of the carrier's health
benefit plans that are sold to, offered through, or sponsored by,
small employers or associations that include small employers for plan
years on or after January 1, 2014, to all small employers in each
geographic region in which the carrier makes coverage available or
provides benefits.
(2) A carrier that offers qualified health plans through the
Exchange shall be deemed to be in compliance with paragraph (1) with
respect to health benefit plans offered through the Exchange in those
geographic regions in which the carrier offers plans through the
Exchange.
(3) A carrier shall provide enrollment periods consistent with
PPACA and described in Section 155.725 of Title 45 of the Code of
Federal Regulations. Commencing January 1, 2014, a carrier shall
provide special enrollment periods consistent with the special
enrollment periods described in Section 10965.3, to the extent
permitted by PPACA, except for the triggering events identified in
paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the
Code of Federal Regulations with respect to health benefit plans
offered through the Exchange.
(4) Nothing in this section shall be construed to require an
association, or a trust established and maintained by an association
to receive a master insurance policy issued by an admitted insurer
and to administer the benefits thereof solely for association
members, to offer, market, or sell a benefit plan design to those who
are not members of the association. However, if the association
markets, offers, or sells a benefit plan design to those who are not
members of the association it is subject to the requirements of this
section. This shall apply to an association that otherwise meets the
requirements of paragraph (8) formed by merger of two or more
associations after January 1, 1992, if the predecessor organizations
had been in active existence on January 1, 1992, and for at least
five years prior to that date and met the requirements of paragraph
(5).
(5) A carrier which (A) effective January 1, 1992, and at least 20
years prior to that date, markets, offers, or sells benefit plan
designs only to all members of one association and (B) does not
market, offer, or sell any other individual, selected group, or group
policy or contract providing medical, hospital, and surgical
benefits shall not be required to market, offer, or sell to those who
are not members of the association. However, if the carrier markets,
offers, or sells any benefit plan design or any other individual,
selected group, or group policy or contract providing medical,
hospital, and surgical benefits to those who are not members of the
association it is subject to the requirements of this section.
(6) Each carrier that sells health benefit plans to members of one
association pursuant to paragraph (5) shall submit an annual
statement to the commissioner which states that the carrier is
selling health benefit plans pursuant to paragraph (5) and which, for
the one association, lists all the information required by paragraph
(7).
(7) Each carrier that sells health benefit plans to members of any
association shall submit an annual statement to the commissioner
which lists each association to which the carrier sells health
benefit plans, the industry or profession which is served by the
association, the association's membership criteria, a list of
officers, the state in which the association is organized, and the
site of its principal office.
(8) For purposes of paragraphs (4) and (6), an association is 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
small employer meeting its membership criteria, which do not
condition membership directly or indirectly on the health or claims
history of any person, which 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, which is
organized and maintained in good faith for purposes unrelated to
insurance, which has been in active existence on January 1, 1992, and
at least five years prior to that date, which has a constitution and
bylaws, or other analogous governing documents which provide for
election of the governing board of the association by its members,
which has contracted with one or more carriers to offer one or more
health benefit plans to all individual members and small employer
members in this state. Health coverage through an association that is
not related to employment shall be considered individual coverage
pursuant to Section 144.102(c) of Title 45 of the Code of Federal
Regulations.
(c) On and after October 1, 2013, each carrier shall make
available to each small employer all health benefit plans that the
carrier offers or sells to small employers or to associations that
include small employers for plan years on or after January 1, 2014.
Notwithstanding subdivision (c) of Section 10753, for purposes of
this subdivision, companies that are affiliated companies or that are
eligible to file a consolidated income tax return shall be treated
as one carrier.
(d) Each carrier shall do all of the following:
(1) Prepare a brochure that summarizes all of its health benefit
plans and make this summary available to small employers, agents, and
brokers upon request. The summary shall include for each plan
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,
and a telephone number that can be called for more detailed benefit
information. Carriers are required to keep the information contained
in the brochure accurate and up to date, and, upon updating the
brochure, send copies to agents and brokers representing the carrier.
Any entity that provides administrative services only with regard to
a health benefit plan written or issued by another carrier shall not
be required to prepare a summary brochure which includes that
benefit plan.
(2) For each health benefit plan, prepare a more detailed evidence
of coverage and make it available to small employers, agents, and
brokers upon request. The evidence of coverage shall contain all
information that a prudent buyer would need to be aware of in making
selections of benefit plan designs. An entity that provides
administrative services only with regard to a health benefit plan
written or issued by another carrier shall not be required to prepare
an evidence of coverage for that health benefit plan.
(3) Provide copies of the current summary brochure to all agents
or brokers who represent the carrier and, upon updating the brochure,
send copies of the updated brochure to agents and brokers
representing the carrier for the purpose of selling health benefit
plans.
(4) Notwithstanding subdivision (c) of Section 10753, for purposes
of this subdivision, companies that are affiliated companies or that
are eligible to file a consolidated income tax return shall be
treated as one carrier.
(e) Every agent or broker representing one or more carriers for
the purpose of selling health benefit plans to small employers shall
do all of the following:
(1) When providing information on a health benefit plan to a small
employer but making no specific recommendations on particular
benefit plan designs:
(A) Advise the small employer of the carrier's obligation to sell
to any small employer any of the health benefit plans it offers to
small employers, consistent with PPACA, and provide them, upon
request, with the actual rates that would be charged to that employer
for a given health benefit plan.
(B) Notify the small employer that the agent or broker will
procure rate and benefit information for the small employer on any
health benefit plan offered by a carrier for whom the agent or broker
sells health benefit plans.
(C) Notify the small employer that, upon request, the agent or
broker will provide the small employer with the summary brochure
required in paragraph (1) of subdivision (d) for any benefit plan
design offered by a carrier whom the agent or broker represents.
(D) Notify the small employer of the availability of coverage and
the availability of tax credits for certain employers consistent with
PPACA and state law, including any rules, regulations, or guidance
issued in connection therewith.
(2) When recommending a particular benefit plan design or designs,
advise the small employer that, upon request, the agent will provide
the small employer with the brochure required by paragraph (1) of
subdivision (d) containing the benefit plan design or designs being
recommended by the agent or broker.
(3) Prior to filing an application for a small employer for a
particular health benefit plan:
(A) For each of the health benefit plans offered by the carrier
whose health benefit plan the agent or broker is presenting, provide
the small employer with the benefit summary required in paragraph (1)
of subdivision (d) and the premium for that particular employer.
(B) Notify the small employer that, upon request, the agent or
broker will provide the small employer with an evidence of coverage
brochure for each health benefit plan the carrier offers.
(C) Obtain a signed statement from the small employer
acknowledging that the small employer has received the disclosures
required by this paragraph and Section 10753.16.
(f) No carrier, agent, or broker shall induce or otherwise
encourage a small employer to separate or otherwise exclude an
eligible employee from a health benefit plan which, in the case of an
eligible employee meeting the definition in paragraph (1) of
subdivision (f) of Section 10753, is provided in connection with the
employee's employment or which, in the case of an eligible employee
as defined in paragraph (2) of subdivision (f) of Section 10753, is
provided in connection with a guaranteed association.
(g) No carrier shall reject an application from a small employer
for a health benefit plan provided:
(1) The small employer as defined by subparagraph (A) of paragraph
(1) of subdivision (q) of Section 10753 offers health benefits to
100 percent of its eligible employees as defined in paragraph (1) of
subdivision (f) of Section 10753. Employees who waive coverage on the
grounds that they have other group coverage shall not be counted as
eligible employees.
(2) The small employer agrees to make the required premium
payments.
(h) No carrier or agent or broker shall, directly or indirectly,
engage in the following activities:
(1) Encourage or direct small employers to refrain from filing an
application for coverage with a carrier because of the health status,
claims experience, industry, occupation, or geographic location
within the carrier's approved service area of the small employer or
the small employer's employees.
(2) Encourage or direct small employers to seek coverage from
another carrier because of the health status, claims experience,
industry, occupation, or geographic location within the carrier's
approved service area of the small employer or the small employer's
employees.
(3) Employ marketing practices or benefit designs that will have
the effect of discouraging the enrollment of individuals with
significant health needs or discriminate based on the individual's
race, color, national origin, present or predicted disability, age,
sex, gender identity, sexual orientation, expected length of life,
degree of medical dependency, quality of life, or other health
conditions.
This subdivision shall be enforced in the same manner as Section
790.03, including through Sections 790.035 and 790.05.
(i) No carrier shall, directly or indirectly, enter into any
contract, agreement, or arrangement with an agent or broker that
provides for or results in the compensation paid to an agent or
broker for a health benefit plan to be varied because of the health
status, claims experience, industry, occupation, or geographic
location of the small employer or the small employer's employees.
This subdivision shall not apply with respect to a compensation
arrangement that provides compensation to an agent or broker 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.
(j) (1) A health benefit plan offered to a small employer, as
defined in Section 1304(b) of PPACA and in Section 10753, 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:
(A) Health status.
(B) Medical condition, including physical and mental illnesses.
(C) Claims experience.
(D) Receipt of health care.
(E) Medical history.
(F) Genetic information.
(G) Evidence of insurability, including conditions arising out of
acts of domestic violence.
(H) Disability.
(I) 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.
(2) Notwithstanding Section 10291.5, a carrier shall not require
an eligible employee or dependent to fill out a health assessment or
medical questionnaire prior to enrollment under a health benefit
plan. A carrier shall not acquire or request information that relates
to a health status-related factor from the applicant or his or her
dependent or any other source prior to enrollment of the individual.
(k) (1) A carrier shall consider as a single risk pool for rating
purposes in the small employer market the claims experience of all
insureds in all nongrandfathered small employer health benefit plans
offered by the carrier in this state, whether offered as health care
service plan contracts or health insurance policies, including those
insureds and enrollees who enroll in coverage through the Exchange
and insureds and enrollees covered by the carrier outside of the
Exchange.
(2) At least each calendar year, and no more frequently than each
calendar quarter, a carrier shall establish an index rate for the
small employer market in the state based on the total combined claims
costs for providing essential health benefits, as defined pursuant
to Section 1302 of PPACA and Section 10112.27, within the single risk
pool required under paragraph (1). The index rate shall be adjusted
on a marketwide basis based on the total expected marketwide payments
and charges under the risk adjustment and reinsurance programs
established for the state pursuant to Sections 1343 and 1341 of PPACA
and Exchange user fees, as described in subdivision (d) of Section
156.80 of Title 45 of the Code of Federal Regulations. The premium
rate for all of the nongrandfathered health benefit plans within the
single risk pool required under paragraph (1) shall use the
applicable marketwide adjusted index rate, subject only to the
adjustments permitted under paragraph (3).
(3) A carrier may vary premium rates for a particular
nongrandfathered health benefit plan from its index rate based only
on the following actuarially justified plan-specific factors:
(A) The actuarial value and cost-sharing design of the health
benefit plan.
(B) The health benefit plan's provider network, delivery system
characteristics, and utilization management practices.
(C) The benefits provided under the health benefit plan that are
in addition to the essential health benefits, as defined pursuant to
Section 1302 of PPACA. These additional benefits shall be pooled with
similar benefits within the single risk pool required under
paragraph (1) and the claims experience from those benefits shall be
utilized to determine rate variations for health benefit plans that
offer those benefits in addition to essential health benefits.
(D) Administrative costs, excluding any user fees required by the
Exchange.
(E) With respect to catastrophic plans, as described in subsection
(e) of Section 1302 of PPACA, the expected impact of the specific
eligibility categories for those plans.
(l) If a carrier enters into a contract, agreement, or other
arrangement with a third-party administrator or other entity to
provide administrative, marketing, or other services related to the
offering of health benefit plans to small employers in this state,
the third-party administrator shall be subject to this chapter.
(m) (1) Except as provided in paragraph (2), this section shall
become inoperative if Section 2702 of the federal Public Health
Service Act (42 U.S.C. Sec. 300gg-1), as added by Section 1201 of
PPACA, is repealed, in which case, 12 months after the repeal,
carriers subject to this section shall instead be governed by Section
10705 to the extent permitted by federal law, and all references in
this chapter to this section shall instead refer to Section 10705,
except for purposes of paragraph (2).
(2) Paragraph (3) of subdivision (b) of this section shall remain
operative as it relates to health benefit plans offered through the
Exchange.
(a) For contracts expiring after July 1, 1994, 60 days
prior to July 1, 1994, an association that meets the definition of
guaranteed association, as set forth in Section 10753, except for the
requirement that 1,000 persons be covered, shall be entitled to
purchase small employer health coverage 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
10753, (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.
Every carrier shall file with the commissioner the
reasonable participation requirements and employer contribution
requirements that are to be included in its health benefit plans.
Participation requirements shall be applied uniformly among all small
employer groups, except that a carrier may vary application of
minimum employer 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 carrier shall not establish a
participation requirement that (1) requires a person who meets the
definition of a dependent in subdivision (e) of Section 10753 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
carrier 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 eligible under subdivision (s) of Section 10753 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 carrier's reasonable participation
standards.
(a) With respect to small employer health benefit plans
offered outside the Exchange, after a small employer submits a
completed application, the carrier shall, within 30 days, notify the
employer of the employer's actual rates in accordance with Section
10753.14. The employer has 30 days in which to exercise the right to
buy coverage at the quoted rates.
(b) Except as required under subdivision (c), when a small
employer submits a premium payment, based on the quoted rates, and
that payment is delivered or postmarked, whichever occurs earlier,
within the first 15 days of a month, coverage shall become effective
no later than the first day of the following month. When that payment
is neither delivered nor 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) (1) With respect to a small employer health benefit plan
offered through the Exchange, a carrier shall apply coverage
effective dates consistent with those required under Section 155.720
of Title 45 of the Code of Federal Regulations and of subdivision (e)
of Section 10965.3.
(2) With respect to a small employer health benefit plan offered
outside the Exchange for which an individual applies during a special
enrollment period described in paragraph (3) of subdivision (b) of
Section 10753.05, the following provisions shall apply:
(A) Coverage under the plan shall become effective no later than
the first day of the first calendar month beginning after the date
the carrier receives the request for special enrollment.
(B) Notwithstanding subparagraph (A), in the case of a birth,
adoption, or placement for adoption, coverage under the plan shall
become effective on the date of birth, adoption, or placement for
adoption.
(d) During the first 30 days of coverage, the small employer shall
have the option of changing coverage to a different health benefit
plan offered by the same carrier. If a small employer notifies the
carrier 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 a small employer
notifies the carrier of the change after the 15th day of a month,
coverage under the new health benefit plan shall become effective no
later than the first day of the second month following notification.
(e) All eligible employees and dependents listed on a small
employer's completed application shall be covered on the effective
date of the health benefit plan.
A health benefit plan shall not impose a preexisting
condition provision or a waiting or affiliation period upon any
individual.
Nothing in this chapter shall be construed as prohibiting
a carrier from restricting enrollment of late enrollees to open
enrollment periods provided under Section 10753.05 as authorized
under Section 2702 of the federal Public Health Service Act.
(a) To the extent permitted by PPACA, a carrier shall not
be required by the provisions of this chapter to do any of the
following:
(1) Offer coverage to, or accept applications from, a small
employer where the small employer is seeking coverage for eligible
employees and dependents who do not live, work, or reside in a
carrier's service areas.
(2) (A) Offer coverage to, or accept applications from, a small
employer for a benefits plan design within an area if the
commissioner has found all of the following:
(i) The carrier will not have the capacity within the area in its
network of providers to deliver service adequately to the eligible
employees and dependents of that employee because of its obligations
to existing group contractholders and enrollees.
(ii) The carrier is applying this paragraph uniformly to all
employers without regard to the claims experience of those employers,
and their employees and dependents, or any health status-related
factor relating to those employees and dependents.
(iii) The action is not unreasonable or clearly inconsistent with
the intent of this chapter.
(B) A carrier that cannot offer coverage to small employers in a
specific service area because it is lacking sufficient capacity as
described in this paragraph may not offer coverage in the applicable
area to new employer groups until the later of the following dates:
(i) The 181st day after the date that coverage is denied pursuant
to this paragraph.
(ii) The date the carrier notifies the commissioner that it has
regained capacity to deliver services to small employers, and
certifies to the commissioner that from the date of the notice it
will enroll all small groups requesting coverage from the carrier
until the carrier has met the requirements of subdivision (g) of
Section 10753.05.
(C) Subparagraph (B) shall not limit the carrier's ability to
renew coverage already in force or relieve the carrier of the
responsibility to renew that coverage as described in Sections
10273.4 and 10753.13.
(D) Coverage offered within a service area after the period
specified in subparagraph (B) shall be subject to the requirements of
this section.
(a) A carrier shall not be required to offer coverage or
accept applications for benefit plan designs pursuant to this chapter
where the carrier demonstrates to the satisfaction of the
commissioner both of the following:
(1) The acceptance of an application or applications would place
the carrier in a financially impaired condition.
(2) The carrier is applying this subdivision uniformly to all
employers without regard to the claims experience of those employers
and their employees and dependents or any health status-related
factor relating to those employees and dependents.
(b) The commissioner's determination under subdivision (a) shall
follow an evaluation that includes a certification by the
commissioner that the acceptance of an application or applications
would place the carrier in a financially impaired condition.
(c) A carrier that has not offered coverage or accepted
applications pursuant to this chapter shall not offer coverage or
accept applications for any individual or group health benefit plan
until the later of the following dates:
(1) The 181st day after the date that coverage is denied pursuant
to this section.
(2) The date on which the carrier ceases to be financially
impaired, as determined by the commissioner.
(d) Subdivision (c) shall not limit the carrier's ability to renew
coverage already in force or relieve the carrier of the
responsibility to renew that coverage as described in Sections
10273.4, 10273.6, and 10753.13.
(e) Coverage offered within a service area after the period
specified in subdivision (c) shall be subject to the requirements of
this section.
All health benefit plans subject to this chapter shall be
renewable with respect to all eligible employees or dependents at
the option of the policyholder, contractholder, or small employer
except as follows:
(a) (1) For nonpayment of the required premiums by the
policyholder, contractholder, or small employer, if the policyholder,
contractholder, or small employer has been duly notified and billed
for the charge and at least a 30-day grace period has elapsed since
the date of notification or, if longer, the period of time required
for notice and any other requirements pursuant to Section 2703, 2712,
or 2742 of the federal Public Health Service Act (42 U.S.C. Secs.
300gg-2, 300gg-12, and 300gg-42) and any subsequent rules or
regulations has elapsed.
(2) An insurer shall continue to provide coverage as required by
the policyholder's, contractholder's, or small employer's policy
during the period described in paragraph (1). Nothing in this section
shall be construed to affect or impair the policyholder's,
contractholder's, small employer's, or insurer's other rights and
responsibilities pursuant to the subscriber contract.
(b) If the insurer demonstrates fraud or an intentional
misrepresentation of material fact under the terms of the policy by
the policyholder, contractholder, or small employer or, with respect
to coverage of individual enrollees, the enrollees or their
representative.
(c) Violation of a material contract provision relating to
employer contribution or group participation rates by the
policyholder, contractholder, or small employer.
(d) When the carrier ceases to write, issue, or administer new or
existing grandfathered or nongrandfathered small employer health
benefit plans in this state, provided, however, that the following
conditions are satisfied:
(1) Notice of the decision to cease writing, issuing, or
administering new or existing small employer health benefits plans in
this state is provided to the commissioner, and to either the
policyholder, contractholder, or small employer at least 180 days
prior to the discontinuation of the coverage.
(2) Small employer health benefit plans subject to this chapter
shall not be canceled for 180 days after the date of the notice
required under paragraph (1). For that business of a carrier that
remains in force, any carrier that ceases to write, issue, or
administer new or existing health benefit plans shall continue to be
governed by this chapter.
(3) Except in the case where a certification has been approved
pursuant to subdivision (l) of Section 10753.05 or the commissioner
has made a determination pursuant to subdivision (a) of Section
10753.12, a carrier that ceases to write, issue, or administer new
health benefit plans to small employers in this state after the
passage of this chapter shall be prohibited from writing, issuing, or
administering new health benefit plans to small employers in this
state for a period of five years from the date of notice to the
commissioner.
(e) When a carrier withdraws a benefit plan design from the small
employer market, provided that the carrier notifies all affected
policyholders, contractholders, or small employers and the
commissioner at least 90 days prior to the discontinuation of those
contracts, and that the carrier makes available to the small employer
all small employer benefit plan designs which it markets.
(f) If coverage is made available through a bona fide association
pursuant to subdivision (q) of Section 10753 or a guaranteed
association pursuant to subdivision (r) of Section 10753, the
membership of the employer or the individual, respectively, ceases,
but only if that coverage is terminated under this subdivision
uniformly without regard to any health status-related factor of
covered individuals.
(a) The premium rate for a small employer health benefit
plan issued, amended, or renewed on or after January 1, 2014, shall
vary with respect to the particular coverage involved only by the
following:
(1) Age, pursuant to the age bands established by the United
States Secretary of Health and Human Services and the age rating
curve established by the Centers for Medicare and Medicaid Services
pursuant to Section 2701(a)(3) of the federal Public Health Service
Act (42 U.S.C. Sec. 300gg(a)(3)). Rates based on age shall be
determined using the individual's age as of the date of the plan
issuance or renewal, as applicable, and shall not vary by more than
three to one for like individuals of different age who are 21 years
of age or older as described in federal regulations adopted pursuant
to Section 2701(a)(3) of the federal Public Health Service Act (42
U.S.C. Sec. 300gg(a)(3)).
(2) (A) Geographic region. The geographic regions for purposes of
rating shall be the following:
(i) Region 1 shall consist of the Counties of Alpine, Amador,
Butte, Calaveras, Colusa, Del Norte, Glenn, Humboldt, Lake, Lassen,
Mendocino, Modoc, Nevada, Plumas, Shasta, Sierra, Siskiyou, Sutter,
Tehama, Trinity, Tuolumne, and Yuba.
(ii) Region 2 shall consist of the Counties of Marin, Napa,
Solano, and Sonoma.
(iii) Region 3 shall consist of the Counties of El Dorado, Placer,
Sacramento, and Yolo.
(iv) Region 4 shall consist of the City and County of San
Francisco.
(v) Region 5 shall consist of the County of Contra Costa.
(vi) Region 6 shall consist of the County of Alameda.
(vii) Region 7 shall consist of the County of Santa Clara.
(viii) Region 8 shall consist of the County of San Mateo.
(ix) Region 9 shall consist of the Counties of Monterey, San
Benito, and Santa Cruz.
(x) Region 10 shall consist of the Counties of Mariposa, Merced,
San Joaquin, Stanislaus, and Tulare.
(xi) Region 11 shall consist of the Counties of Fresno, Kings, and
Madera.
(xii) Region 12 shall consist of the Counties of San Luis Obispo,
Santa Barbara, and Ventura.
(xiii) Region 13 shall consist of the Counties of Imperial, Inyo,
and Mono.
(xiv) Region 14 shall consist of the County of Kern.
(xv) Region 15 shall consist of the ZIP Codes in the County of Los
Angeles starting with 906 to 912, inclusive, 915, 917, 918, and 935.
(xvi) Region 16 shall consist of the ZIP Codes in the County of
Los Angeles other than those identified in clause (xv).
(xvii) Region 17 shall consist of the Counties of Riverside and
San Bernardino.
(xviii) Region 18 shall consist of the County of Orange.
(xix) Region 19 shall consist of the County of San Diego.
(B) No later than June 1, 2017, the department, in collaboration
with the Exchange and the Department of Managed Health Care, shall
review the geographic rating regions specified in this paragraph and
the impacts of those regions on the health care coverage market in
California, and submit a report to the appropriate policy committees
of the Legislature. The requirement for submitting a report imposed
under this subparagraph is inoperative June 1, 2021, pursuant to
Section 10231.5 of the Government Code.
(3) Whether the health benefit plan covers an individual or
family, as described in PPACA.
(b) The rate for a health benefit plan subject to this section
shall not vary by any factor not described in this section.
(c) The total premium charged to a small employer pursuant to this
section shall be determined by summing the premiums of covered
employees and dependents in accordance with Section 147.102(c)(1) of
Title 45 of the Code of Federal Regulations.
(d) The rating period for rates subject to this section shall be
no less than 12 months from the date of issuance or renewal of the
health benefit plan.
(e) If Section 2701 of the federal Public Health Service Act (42
U.S.C. Sec. 300gg), as added by Section 1201 of PPACA, is repealed,
this section shall become inoperative 12 months after the repeal
date, in which case rates for health benefit plans subject to this
section shall instead be subject to Section 10714, to the extent
permitted by federal law, and all references to this section shall be
deemed to be references to Section 10714.
In connection with the offering for sale of a health
benefit plan subject to this chapter to small employers:
Each carrier shall make a reasonable disclosure, as part of its
solicitation and sales materials, of the following:
(a) The provisions concerning the carrier's ability to change
premium rates and the factors that affect changes in premium rates.
The carrier shall disclose that claims experience cannot be used.
(b) Provisions relating to the guaranteed issue of policies and
contracts.
(c) A statement that no preexisting condition provisions shall be
allowed.
(d) Provisions relating to the small employer's right to apply for
any health benefit plan written, issued, or administered by the
carrier at the time of application for a new health benefit plan, or
at the time of renewal of a health benefit plan.
(e) The availability, upon request, of a listing of all the
carrier's benefit plan designs offered, both inside and outside the
Exchange, including the rates for each benefit plan design.
(a) No carrier shall provide or renew coverage subject to
this chapter until a statement has been filed with the commissioner
listing all of the carrier's health benefit plans currently in force
that are offered or proposed to be offered for sale in this state,
identified by form number, and, if previously approved by the
commissioner, the date approved by the commissioner.
(b) No carrier shall issue, deliver, renew, or revise a health
benefit plan lawfully provided pursuant to subdivision (a) until all
of the following requirements are met:
(1) The carrier files with the commissioner a statement of the
factors used to establish rates for the plan.
(2) Either:
(A) Thirty days expires after the statement is filed without
written notice from the commissioner specifying the reasons for his
or her opinion that the carrier's rating factors do not comply with
the requirements of this chapter.
(B) Prior to that time the commissioner gives the carrier written
notice that the carrier's rating factors as filed comply with the
requirements of this chapter.
(c) If the commissioner notifies the carrier, in writing, that the
carrier's rating factors do not comply with the requirements of this
chapter, specifying the reasons for his or her opinion, it is
unlawful for the carrier, at any time after the receipt of such
notice, to utilize the noncomplying health benefit plan or rating
factors in conjunction with the health benefit plans or benefit plan
designs for which the filing was made.
(d) Each carrier shall maintain at its principal place of business
copies of all information required to be filed with the commissioner
pursuant to this section.
(e) Each carrier shall make the information and documentation
described in this section available to the commissioner upon request.
(f) Nothing in this section shall be construed to permit the
commissioner to establish or approve the rates charged to
policyholders for health benefit plans.
(a) In addition to any other remedy permitted by law, the
commissioner shall have the administrative authority to assess
penalties against carriers, insurance producers, and other entities
engaged in the business of insurance or other persons or entities for
violations of this chapter.
(b) Upon a showing of a violation of this chapter in any civil
action, a court may also assess the penalties described in this
chapter, in addition to any other remedies provided by law.
(c) Any production agent or other person or entity engaged in the
business of insurance, other than a carrier, that violates this
chapter is liable for administrative penalties of not more than two
hundred fifty dollars ($250) for the first violation.
(d) Any production agent or other person or entity engaged in the
business of insurance, other than a carrier, that engages in
practices prohibited by this chapter a second or subsequent time, or
who commits a knowing violation of this chapter, is liable for
administrative penalties of not less than one thousand dollars
($1,000) and not more than two thousand five hundred dollars ($2,500)
for each violation.
(e) Any carrier that violates this chapter is liable for
administrative penalties of not more than two thousand five hundred
dollars ($2,500) for the first violation and not more than five
thousand dollars ($5,000) for each subsequent violation.
(f) Any carrier that violates this chapter with a frequency that
indicates a general business practice or commits a knowing violation
of this chapter, is liable for administrative penalties of not less
than fifteen thousand dollars ($15,000) and not more than one hundred
thousand dollars ($100,000) for each violation.
(g) An act or omission that is inadvertent and that results in
incorrect premium rates being charged to more than one policyholder
shall be a single violation for the purpose of this section.
(a) (1) In addition to any other remedy permitted by
law, whenever the commissioner shall have reason to believe that any
carrier, production agent, or other person or entity engaged in the
business of insurance has violated this chapter, and that a
proceeding by the commissioner in respect thereto would be in the
interest of the public, the commissioner may issue and serve upon
that entity an order to show cause containing a statement of the
charges, a statement of the entity's potential liability under this
chapter, and a notice of a public hearing thereon before the
Administrative Law Bureau of the department to be held at a time and
place fixed therein, which shall not be less than 30 days after the
service thereof, for the purpose of determining whether the
commissioner should issue an order to that entity to pay the penalty
imposed by this chapter and such order or orders as shall be
reasonably necessary to correct, eliminate, or remedy the alleged
violations of this chapter, including, but not limited to, an order
to cease and desist from the specified violations of this chapter.
(2) The hearings provided by this subdivision shall be conducted
in accordance with the Administrative Procedure Act (Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code), and the commissioner shall have all the powers
granted therein.
(b) (1) Whenever it appears to the commissioner that irreparable
loss and injury has occurred or may occur to an insured, employer,
employee, or other member of the public because a carrier, production
agent, or other person or entity engaged in the business of
insurance has violated this chapter, the commissioner may, before
hearing, but after notice and opportunity to submit relevant
information, issue and cause to be served upon the entity such order
or orders as shall be reasonably necessary to correct, eliminate, or
remedy the alleged violations of this chapter, including, but not
limited to, an order requiring the entity to forthwith cease and
desist from engaging further in the violations which are causing or
may cause such irreparable injury.
(2) At the same time an order is served pursuant to paragraph (1)
of this subdivision, the commissioner shall issue and also serve upon
the person a notice of public hearing before the Administrative Law
Bureau of the department to be held at a time and place fixed
therein, which shall not be less than 30 days after the service
thereof.
(3) The hearings provided by this subdivision shall be conducted
in accordance with the Administrative Procedure Act (Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code), and the commissioner shall have all the powers
granted therein.
(4) At any time prior to the commencement of a hearing as provided
in this subdivision, the entity against which the commissioner has
served an order may waive the hearing and have judicial review of the
order by means of any remedy afforded by law without first
exhausting administrative remedies or procedures.
(c) If, after hearing as provided by subdivision (a) or (b), the
charges, or any of them, that an entity has violated this chapter are
found to be justified, the commissioner shall issue and cause to be
served upon that entity an order requiring that entity to pay the
penalty imposed by this chapter and such order or orders as shall be
reasonably necessary to correct, eliminate, or remedy the alleged
violations of this chapter, including, but not limited to, an order
to cease and desist from the specified violations of this chapter.
(d) In addition to any other penalty provided by law or the
availability of any administrative procedure, if a carrier, after
notice and hearing, is found to have violated this chapter knowingly
or as a general business practice the commissioner may suspend the
carrier's certificate of authority to transact disability insurance.
The order of suspension shall prescribe the period of such
suspension. The proceedings shall be conducted in accordance with the
Administrative Procedure Act, Chapter 5 (commencing with Section
11500) of Part 1 of Division 3 of Title 2 of the Government Code and
the commissioner shall have all the powers granted therein.
(a) Carriers 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. Carriers 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 carrier shall
permit all qualified associations to assume one or more of these
functions when the carrier determines the qualified association
demonstrates that it has 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 carrier or
through a third-party administrator on a commission basis or an agent
or solicitor workforce on a commission basis.
Each carrier 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 carrier has permitted the
qualified association or its third-party administrator to assume.
The carrier shall apply these uniform discounts to the carrier's
rates pursuant to Section 10753.14. The carrier shall report to the
department its schedule of discounts for each administrative service.
In no instance may a carrier 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 commissioner to
enforce this chapter, the commissioner may declare a contract between
a carrier and a qualified association for administrative services
pursuant to this section null and void if the commissioner 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 any plan contract only to association
members.
(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 the requirements set
forth in Section 10198.9.
Notwithstanding any other provision of law, no
provision of this chapter shall be construed to limit the
applicability of any other provision of the Insurance Code unless
such provision is in conflict with the requirements of this chapter.