Article 2. Small Employer Carrier Requirements of California Insurance Code >> Division 2. >> Part 2. >> Chapter 8.02. >> Article 2.
(a) This chapter shall apply only to grandfathered health
benefit plans and only with respect to plan years commencing on or
after January 1, 2014.
(b) All carriers 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 10755.
(a) The department may adopt emergency regulations
implementing this chapter 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.
(c) This section shall become operative on January 1, 2013.
(a) (1) Each carrier, except a self-funded employer,
shall fairly and affirmatively renew all of the carrier's health
benefit plans that are sold to small employers or associations that
include small employers.
(2) 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 (6) 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
(3).
(3) 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.
(4) Each carrier that sells health benefit plans to members of one
association pursuant to paragraph (3) shall submit an annual
statement to the commissioner which states that the carrier is
selling health benefit plans pursuant to paragraph (3) and which, for
the one association, lists all the information required by paragraph
(5).
(5) 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.
(6) For purposes of paragraphs (2) and (3), 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.
(b) Each carrier shall make available to each small employer all
nongrandfathered health benefit plans that the carrier offers or
sells to small employers or to associations that include small
employers. Notwithstanding subdivision (c) of Section 10755, 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.
(c) 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 health
benefit 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, standard employee risk rates, 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 benefit plan
design written or issued by another carrier shall not be required to
prepare a summary brochure which includes that benefit plan design.
(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 benefit plan design
written or issued by another carrier shall not be required to prepare
an evidence of coverage for that benefit plan design.
(3) Provide to small employers and agents and brokers, 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 and agents
and brokers 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 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.
(5) Notwithstanding subdivision (c) of Section 10755, 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) 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 (e) of Section 10755, 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 (e) of Section 10755, is
provided in connection with a guaranteed association.
(e) 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 or the California Health Benefit Exchange 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.
(f) 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.
(g) A policy or contract that covers a small employer, as defined
in Section 1304(b) of PPACA and in subdivision (q) of Section 10755
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.
(h) 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.
(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 10755, 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
10755, (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 that will be required in
renewing its health benefit plans. Participation requirements of a
health benefit plan 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
of a health benefit plan 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 (d) of
Section 10755 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 (t) of Section 10755
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 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 consistent with federal law.
No carrier shall be required by the provisions of this
chapter:
(a) To include in a health benefit plan an otherwise eligible
employee or dependent, when the eligible employee or dependent does
not work or reside within a carrier's approved service area, except
as provided in Section 10755.02.1.
(b) To offer coverage to an eligible employee, as defined in
paragraph (2) of subdivision (e) of Section 10755, who within 12
months of application for coverage terminated from a health benefit
plan offered by the carrier.
All grandfathered health benefit plans 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) 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 health benefit plan 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 nongrandfathered small employer health benefit plans which it
markets and satisfies the requirements of Section 10714.
(f) If coverage is made available through a bona fide association
pursuant to subdivision (q) of Section 10755 or a guaranteed
association pursuant to subdivision (s) of Section 10755, 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.
Premiums for grandfathered health benefit plans written
or administered by carriers on or after the January 1, 2014, shall be
subject to the following requirements:
(a) (1) The premium for new business shall be determined for an
eligible employee in a particular risk category after applying a risk
adjustment factor to the carrier's standard employee risk rates. The
risk adjusted employee risk rate may not be more than 110 percent or
less than 90 percent.
(2) The premium charged a small employer for new business shall be
equal to the sum of the risk adjusted employee risk rates.
(3) The standard employee risk rates applied to a small employer
for new business shall be in effect for no less than 12 months.
(b) (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 carrier's standard employee risk rates.
The risk adjusted employee risk rate 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 12 months.
(c) (1) For any small employer, a carrier 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 subdivisions (a) and (b). 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 carrier may reserve the right to redetermine the composite
rates if the enrollment under the health benefit plan 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 carrier reserves the
right to redetermine the rates and the enrollment changes more than
the specified percentage, the carrier shall redetermine the composite
rates if the redetermined rates would result in a lower premium for
the small employer. A carrier 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.
Carriers shall apply standard employee risk rates
consistently with respect to all small employers.
In connection with the renewal of any grandfathered
health benefit plan to small employers:
Each carrier shall make a reasonable disclosure, as part of its
solicitation and sales materials, of the following:
(a) The extent to which the premium rates for a specified small
employer are established or adjusted in part based upon the actual or
expected variation in claims costs of the employees and dependents
of the small employer.
(b) The provisions concerning the carrier's ability to change
premium rates and the factors other than claim experience which
affect changes in premium rates.
(c) Provisions relating to the guaranteed issue of policies and
contracts.
(d) Provisions relating to the prohibition of any preexisting
condition provision.
(e) Provisions relating to the small employer's right to apply for
any nongrandfathered 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, consistent with the requirements of PPACA.
(f) The availability, upon request, of a listing of all the
carrier's nongrandfathered health benefit plans, offered inside or
outside the California Health Benefit Exchange, including the rates
for each benefit plan design.
(a) No carrier shall renew coverage subject to this
chapter until it has done all of the following:
(1) A statement has been filed with the commissioner listing all
of the carrier's grandfathered health benefit plans currently in
force in this state, identified by form number, and, if previously
approved by the commissioner, the date approved by the commissioner
as well as the standard employee risk rate for each risk category for
each benefit plan design and the highest and lowest risk adjustment
factors that the carrier intends to use in determining rates for each
benefit plan design. When filing a new benefit plan design pursuant
to Section 10755.05, carriers may submit both the policy form and the
standard employee risk rates for each risk category at the same
time.
(2) Either:
(A) Thirty days expires after that statement is filed without
written notice from the commissioner specifying the reasons for his
or her opinion that the carrier's risk categories or risk adjustment
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 risk categories and risk adjustment factors
as filed comply with the requirements of this chapter.
(b) No carrier shall renew or revise a grandfathered health
benefit plan lawfully provided pursuant to subdivision (a), and no
carrier shall change the risk categories, risk adjustment factors, or
standard employee risk rates for a grandfathered health benefit plan
until all of the following requirements are met:
(1) The carrier files with the commissioner a statement of the
specific changes which the carrier proposes in the risk categories,
risk adjustment factors, or standard employee risk rates.
(2) Either:
(A) Thirty days expires after such statement is filed without
written notice from the commissioner specifying the reasons for his
or her opinion that the carrier's risk categories or risk adjustment
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 risk categories and risk adjustment factors
as filed comply with the requirements of this chapter.
(c) Notwithstanding any provision to the contrary, when a carrier
is changing the standard employee risk rates of a health benefit plan
lawfully provided under subdivision (a) or (b) but is not changing
the risk categories or risk adjustment factors which have been
previously authorized, the carrier need not comply with the
requirements of paragraph (2) of subdivision (b), but instead shall
submit the revised standard employee risk rates for the health
benefit plan prior to renewing the health benefit plan.
(d) When submitting filings under subdivision (a), (b), or (c), a
carrier may also file with the commissioner at the time of the
filings a statement of the standard employee risk rate for each risk
category the carrier intends to use for each month in the 12 months
subsequent to the date of the filing. Once the requirements of the
applicable subdivision (a), (b), or (c), have been met, these rates
shall be used by the carrier for the 12-month period unless the
carrier is otherwise informed by the commissioner in his or her
response to the filings submitted under subdivision (a), (b), or (c),
provided that any subsequent change in the standard employee risk
rates charged by the carrier which differ from those previously filed
with the commissioner must be newly filed in accordance with this
subdivision and provided that the carrier does not change the risk
categories or risk adjustment factors for the health benefit plan.
(e) If the commissioner notifies the carrier, in writing, that the
carrier's risk categories or risk adjustment 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, benefit plan design, risk categories, or risk
adjustment factors in conjunction with the health benefit plans or
benefit plan designs for which the filing was made.
(f) 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.
(g) Each carrier shall make the information and documentation
described in this section available to the commissioner upon request.
(h) 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 risk
adjusted employee risk rates after the carrier has determined the
qualified association's risk adjusted employee risk rates pursuant to
Section 10755.14. 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.