Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 20-1057.02, Arizona Revised Statutes, is amended to read:

START_STATUTE20-1057.02. Prescription drug formulary; definitions

A. A health care services organization with a prescription drug benefit that uses a drug formulary as a component of the evidence of coverage shall provide to its enrollees notice in the evidence of coverage and the disclosure form prescribed in section 20‑1076 regarding the applicable drug formulary.� The health care services organization shall write the notice so that the language and format are easy to understand.� The notice shall include an explanation of what a drug formulary is, how the health care services organization determines which prescription drugs are included or excluded and how often the health care services organization reviews the contents of the drug formulary.

B. A health care services organization described in subsection A of this section shall:

1. Develop and maintain a process by which health care professionals may request authorization for a medically necessary formulary or nonformulary prescription drug during nonbusiness hours.� If the health care services organization does not maintain that process, the health care services organization shall reimburse an enrollee for the enrollee's out‑of‑pocket expense minus any deductible or copayment for a prescription drug that was purchased by the enrollee without preauthorization but that was later approved by the health care services organization.

2. Develop and maintain a process by which health care professionals may request authorization for medically necessary nonformulary prescription drugs.� The health care services organization shall approve an alternative prescription drug when either of the following conditions is met:

(a) The equivalent prescription drug on the formulary has been ineffective in the treatment of the enrollee's disease or condition.

(b) The equivalent prescription drug on the formulary has caused an adverse or harmful reaction in the enrollee.

C. If the health care services organization's pharmacy benefit plan does not require authorization, subsection B, paragraph 2 of this section does not apply.

D. If the enrollee's treating health care professional makes a determination that the enrollee meets any of the conditions described in subsection B of this section, any denial to cover the nonformulary prescription drug by the health care services organization shall be made in writing by a licensed pharmacist or medical director.� The written denial shall contain an explanation of the denial, including the medical or pharmacological reasons why the authorization was denied, and the licensed pharmacist or medical director who made the denial shall sign it.� The health care services organization shall send a copy of the written denial to the enrollee's treating health care professional who requested the authorization. The health care services organization shall maintain copies of all written denials and shall make the copies available to the department for inspection during regular business hours.

E. Any evidence of coverage that is issued, amended or renewed by a health care services organization and that includes prescription drug benefits shall not limit or exclude coverage for at least sixty days after the health care services organization's notice or the pharmacy's notice pursuant to subsection F of this section to the enrollee, whichever occurs first, for a prescription drug for an enrollee to refill a previously prescribed drug if the prescription drug was previously approved for coverage under the drug formulary or pharmacy benefit plan for the enrollee's medical condition and the health care professional continues to prescribe the prescription drug for the same medical condition.� The limitation or exclusion prohibited by this subsection applies if the prescription drug is appropriately prescribed and is considered safe and effective for treating the enrollee's medical condition.� This subsection does not prohibit the health care professional from prescribing another prescription drug that is covered by the drug formulary and that is medically appropriate for the enrollee, including generic drug substitutions.

F. A health care services organization shall provide written notice of the removal of any prescription drug from the health care services organization's drug formulary to each pharmacy vendor with which the health care services organization has a contract.� On notice from the health care services organization, the contracted pharmacy vendor at the point of dispensing a prescription drug that has been removed from the drug formulary shall notify the enrollee by means of a verbal consultation or other direct communication with an enrollee that the enrollee may be required to consult with a health care professional to obtain a new prescription for a replacement drug after the sixty day period prescribed in subsection E of this section. The notice prescribed in this subsection is not required if the pharmacy vendor is a pharmacy that is owned by a health care services organization or a corporate affiliate of that health care services organization.

G. This section does not:

1. Prohibit a health care services organization from applying deductibles, coinsurance or other cost containment or quality assurance measures.

2. Apply to a health care services organization that provides a multitiered benefit plan that allows access to prescription drugs without authorization by the health care services organization.

H. For the purposes of this section:

1. "Health care professional" means a person who has an active nonrestricted license pursuant to title 32 and who is authorized to write drug prescriptions to treat medical conditions.

2. "Prescription drug" means any prescription medication as defined in section 32‑1901 that is prescribed by a health care professional to an enrollee to treat the enrollee's condition.END_STATUTE

Sec. 2. Repeal

Section 20-1076, Arizona Revised Statutes, is repealed.

Sec. 3. Section 20-2304, Arizona Revised Statutes, is amended to read:

START_STATUTE20-2304. Availability of insurance; premium tax exemption

A. As a condition of doing business in this state, each accountable health plan shall offer at least one health benefits plan on a guaranteed issuance basis to small employers as required by this section.� All small employers qualify for this guaranteed offer of coverage.� The accountable health plan shall provide a health benefits plan to each small employer without regard to health status‑related factors if the small employer agrees to make the premium payments and to satisfy any other reasonable provisions of the plan that are not inconsistent with this chapter.

B. If an accountable health plan offers more than one health benefits plan to small employers, the accountable health plan shall offer a choice of all health benefits plans that the accountable health plan offers to small employers and shall accept any small employer that applies for any of those plans.

C. In addition to the requirements prescribed in section 20‑2323, For any offering of any health benefits plan to a small employer, as part of the accountable health plan's solicitation and sales materials, an accountable health plan shall make a reasonable disclosure to the employer of the availability of the information described in this subsection and, on request of the employer, shall provide that information to the employer.� The accountable health plan shall provide information concerning the following:

1. Provisions of coverage relating to the following, if applicable:

(a) The accountable health plan's right to change premium rates and the factors that may affect changes in premium rates.

(b) Renewability of coverage.

(d) Any affiliation period applied by a health care services organization.

(e) The geographic areas served by health care services organizations.

2. The benefits and premiums available under all health benefits plans for which the employer is qualified.

D. The accountable health plan shall describe the information required by subsection C of this section in language that is understandable by the average small employer and with a level of detail that is sufficient to reasonably inform a small employer of the employer's rights and obligations under the health benefits plan. This requirement is satisfied if the accountable health plan provides each of the following for each product the accountable health plan offers:

1. An outline of coverage that describes the benefits in summary form.

2. The rate or rating schedule that applies to the product, preexisting condition exclusion or affiliation period.

3. The minimum employer contribution and group participation rules that apply to any particular type of coverage.

4. In the case of a network plan, a map or listing of the areas served.

E. An accountable health plan is not required to disclose any information that is proprietary and protected trade secret information under applicable law.

F. An accountable health plan that issues a health benefits plan through a network plan may limit the employers that may apply for any health benefits plan offered by the accountable health plan to those eligible individuals who live, work or reside in the service area for the network plan of the accountable health plan.

G. On approval of the director, an accountable health plan may refuse to enroll a qualified small employer in a health benefits plan or in a geographic area served by the plan if the accountable health plan demonstrates that its financial or administrative capacity to serve previously enrolled groups and individuals would be impaired.� An accountable health plan that refuses to enroll a qualified small employer may not enroll an employer of the same or larger size until the earlier of:

1. The date on which the director determines that the accountable health plan has the capacity to enroll a qualified small employer.

2. The date on which the accountable health plan enrolls a qualified small employer.

H. An accountable health plan that offers coverage to a qualified small employer shall offer coverage to all of the eligible employees of the qualified small employer and their eligible dependents. �

I. An accountable health plan may request health screening and underwriting information on prospective enrollees to evaluate the risks associated with a qualified small employer who applies for coverage.� The accountable health plan may use this information for the purposes of setting premiums, evaluating plan offerings and making reinsurance decisions.� An accountable health plan shall not use this information to deny coverage to a qualified small employer or to an eligible employee or to an eligible dependent, except a late enrollee who attempts to enroll outside an open enrollment period.

J. Accountable health plans are exempt from the premium taxes that are required by section 20‑224, subsection B and sections 20‑837, 20‑1010 and 20‑1060 for the net premiums received for health benefits plans issued to small employers, including the net premiums collected from coverage issued pursuant to section 20‑2313, subsection C.� Each accountable health plan shall notify the small employers to whom it provides coverage of the reductions in the premium tax as specified in this subsection.

K. The director may use independent contractor examiners pursuant to sections 20‑148 and 20‑159 to review the higher level of coverage and lower level of coverage health benefits plans offered by an accountable health plan insurer in compliance with this section.� All examination and examination related expenses shall be borne by the insurer and shall be paid by the insurance examiners' revolving fund pursuant to section 20‑159. END_STATUTE

Sec. 4. Repeal

Section 20-2323, Arizona Revised Statutes, is repealed.