BILL NUMBER: SB 546	ENROLLED
	BILL TEXT

	PASSED THE SENATE  SEPTEMBER 11, 2015
	PASSED THE ASSEMBLY  SEPTEMBER 10, 2015
	AMENDED IN ASSEMBLY  AUGUST 31, 2015
	AMENDED IN SENATE  JUNE 2, 2015
	AMENDED IN SENATE  APRIL 30, 2015

INTRODUCED BY   Senator Leno

                        FEBRUARY 26, 2015

   An act to amend Section 1374.21 of, and to add Section 1385.045
to, the Health and Safety Code, and to amend Section 10199.1 of, and
to add Section 10181.45 to, the Insurance Code, relating to health
care coverage.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 546, Leno. Health care coverage: rate review.
   Existing law, the federal Patient Protection and Affordable Care
Act (PPACA), requires the United States Secretary of Health and Human
Services to establish a process for the annual review of
unreasonable increases in premiums for health insurance coverage in
which health insurance issuers submit to the secretary and the
relevant state a justification for an unreasonable premium increase
prior to implementation of the increase. The PPACA imposes an excise
tax on a provider of applicable employer-sponsored health care
coverage, if the aggregate cost of that coverage provided to an
employee exceeds a specified dollar limit.
    Existing state law, the Knox-Keene Health Care Service Plan Act
of 1975, provides for the licensure and regulation of health care
service plans by the Department of Managed Health Care and makes a
willful violation of the act a crime. Existing law also provides for
the regulation of health insurers by the Department of Insurance.
    Existing law requires a health care service plan or health
insurer in the individual, small group, or large group markets to
file rate information with the Department of Managed Health Care or
the Department of Insurance. For large group plan contracts and
policies, existing law requires a plan or insurer to file rate
information with the respective department at least 60 days prior to
implementing an unreasonable rate increase, as defined in PPACA.
Existing law requires the plan or insurer to also disclose specified
aggregate data with that rate filing. Existing law authorizes the
respective department to review those filings, to report to the
Legislature at least quarterly on all unreasonable rate filings, and
to post on its Internet Web site a decision that an unreasonable rate
increase is not justified or that a rate filing contains inaccurate
information. Existing law requires prior notice, as specified, of
changes to premium rates or coverage in order for those changes to be
effective.
   This bill would add to the existing rate information requirement
to further require large group health care service plans and health
insurers to file with the respective department the weighted average
rate increase for all large group benefit designs during the 12-month
period ending January 1 of the following calendar year. The bill
would require the notice of changes to premium rates or coverage for
large group health plans and insurance policies to provide additional
information regarding whether the rate change is greater than
average rate increases approved by the California Health Benefit
Exchange or by the Board of Administration of the Public Employees'
Retirement System, or would be subject to the excise tax described
above. The bill would require the plan or insurer to file additional
aggregate rate information with the respective department on or
before October 1, 2016, and annually thereafter. The bill would
require the respective department to conduct a public meeting
regarding large group rate changes. The bill would require these
meetings to occur annually after the respective department has
reviewed the large group rate information required to be submitted
annually by the plan or insurer, as specified. The bill would
authorize a health care service plan or health insurer that
exclusively contracts with no more than 2 medical groups to provide
or arrange for professional medical services for enrollees or
insureds to meet this requirement by disclosing its actual trend
experience for the prior year using benefit categories that are the
same or similar to those used by other plans or health insurers.
   Because a willful violation of the bill's requirements by a health
care service plan would be a crime, the bill would impose a
state-mandated local program.
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 1374.21 of the Health and Safety Code is
amended to read:
   1374.21.  (a) (1) A change in premium rates or changes in coverage
stated in a group health care service plan contract shall not become
effective unless the plan has delivered in writing a notice
indicating the change or changes at least 60 days prior to the
contract renewal effective date.
   (2) The notice delivered pursuant to paragraph (1) for large group
health plans shall also include the following information:
   (A) Whether the rate proposed to be in effect is greater than the
average rate increase for individual market products negotiated by
the California Health Benefit Exchange for the most recent calendar
year for which the rates are final.
   (B) Whether the rate proposed to be in effect is greater than the
average rate increase negotiated by the Board of Administration of
the Public Employees' Retirement System for the most recent calendar
year for which the rates are final.
   (C) Whether the rate change includes any portion of the excise tax
paid by the health plan.
   (b) A health care service plan that declines to offer coverage to
or denies enrollment for a large group applying for coverage shall,
at the time of the denial of coverage, provide the applicant with the
specific reason or reasons for the decision in writing, in clear,
easily understandable language.
  SEC. 2.  Section 1385.045 is added to the Health and Safety Code,
to read:
   1385.045.  (a) For large group health care service plan contracts,
each health plan shall file with the department the weighted average
rate increase for all large group benefit designs during the
12-month period ending January 1 of the following calendar year. The
average shall be weighted by the number of enrollees in each large
group benefit design in the plan's large group market and adjusted to
the most commonly sold large group benefit design by enrollment
during the 12-month period. For the purposes of this section, the
large group benefit design includes, but is not limited to, benefits
such as basic health care services and prescription drugs. The large
group benefit design shall not include cost sharing, including, but
not limited to, deductibles, copays, and coinsurance.
   (b) (1) A plan shall also submit any other information required
pursuant to any regulation adopted by the department to comply with
this article.
   (2) The department shall conduct an annual public meeting
regarding large group rates within three months of posting the
aggregate information described in this section in order to permit a
public discussion of the reasons for the changes in the rates,
benefits, and cost sharing in the large group market. The meeting
shall be held in either the Los Angeles area or the San Francisco Bay
area.
   (c) A health care service plan subject to subdivision (a) shall
also disclose the following for the aggregate rate information for
the large group market submitted under this section:
   (1) For rates effective during the 12-month period ending January
1 of the following year, number and percentage of rate changes
reviewed by the following:
   (A) Plan year.
   (B) Segment type, including whether the rate is community rated,
in whole or in part.
   (C) Product type.
   (D) Number of enrollees.
   (E) The number of products sold that have materially different
benefits, cost sharing, or other elements of benefit design.
   (2) For rates effective during the 12-month period ending January
1 of the following year, any factors affecting the base rate, and the
actuarial basis for those factors, including all of the following:
   (A) Geographic region.
   (B) Age, including age rating factors.
   (C) Occupation.
   (D) Industry.
   (E) Health status factors, including, but not limited to,
experience and utilization.
   (F) Employee, and employee and dependents, including a description
of the family composition used.
   (G) Enrollees' share of premiums.
   (H) Enrollees' cost sharing.
   (I) Covered benefits in addition to basic health care services, as
defined in Section 1345, and other benefits mandated under this
article.
   (J) Which market segment, if any, is fully experience rated and
which market segment, if any, is in part experience rated and in part
community rated.
   (K) Any other factor that affects the rate that is not otherwise
specified.
   (3) (A) The plan's overall annual medical trend factor assumptions
for all benefits and by aggregate benefit category, including
hospital inpatient, hospital outpatient, physician services,
prescription drugs and other ancillary services, laboratory, and
radiology for the applicable 12-month period ending January 1 of the
following year. A health plan that exclusively contracts with no more
than two medical groups in the state to provide or arrange for
professional medical services for the enrollees of the plan shall
instead disclose the amount of its actual trend experience for the
prior contract year by aggregate benefit category, using benefit
categories, to the maximum extent possible, that are the same as, or
similar to, those used by other plans.
   (B) The amount of the projected trend separately attributable to
the use of services, price inflation, and fees and risk for annual
plan contract trends by aggregate benefit category, including
hospital inpatient, hospital outpatient, physician services,
prescription drugs and other ancillary services, laboratory, and
radiology. A health plan that exclusively contracts with no more than
two medical groups in the state to provide or arrange for
professional medical services for the enrollees of the plan shall
instead disclose the amount of its actual trend experience for the
prior contract year by aggregate benefit category, using benefit
categories that are, to the maximum extent possible, the same or
similar to those used by other plans.
   (C) A comparison of the aggregate per enrollee per month costs and
rate of changes over the last five years for each of the following:
   (i) Premiums.
   (ii) Claims costs, if any.
   (iii) Administrative expenses.
   (iv) Taxes and fees.
   (D) Any changes in enrollee cost sharing over the prior year
associated with the submitted rate information, including both of the
following:
   (i) Actual copays, coinsurance, deductibles, annual out of pocket
maximums, and any other cost sharing by the benefit categories
determined by the department.
   (ii) Any aggregate changes in enrollee cost sharing over the prior
years as measured by the weighted average actuarial value, weighted
by the number of enrollees.
   (E) Any changes in enrollee benefits over the prior year,
including a description of benefits added or eliminated, as well as
any aggregate changes, as measured as a percentage of the aggregate
claims costs, listed by the categories determined by the department.
   (F) Any cost containment and quality improvement efforts since the
plan's prior year's information pursuant to this section for the
same category of health benefit plan. To the extent possible, the
plan shall describe any significant new health care cost containment
and quality improvement efforts and provide an estimate of potential
savings together with an estimated cost or savings for the projection
period.
   (G) The number of products covered by the information that
incurred the excise tax paid by the health plan.
   (d) The information required pursuant to this section shall be
submitted to the department on or before October 1, 2016, and on or
before October 1 annually thereafter. Information submitted pursuant
to this section is subject to Section 1385.07.
  SEC. 3.  Section 10181.45 is added to the Insurance Code, to read:
   10181.45.  (a) For large group health insurance policies, each
health insurer shall file with the department the weighted average
rate increase for all large group benefit designs during the 12-month
period ending January 1 of the following calendar year. The average
shall be weighted by the number of insureds in each large group
benefit design in the insurer's large group market and adjusted to
the most commonly sold large group benefit design by enrollment
during the 12-month period. For the purposes of this section, the
large group benefit design includes, but is not limited to, benefits
such as basic health care services and prescription drugs. The large
group benefit design shall not include cost sharing, including, but
not limited to, deductibles, copays, and coinsurance.
   (b) (1) A health insurer shall also submit any other information
required pursuant to any regulation adopted by the department to
comply with this article.
   (2) The department shall conduct an annual public meeting
regarding large group rates within three months of posting the
aggregate information described in this section in order to permit a
public discussion of the reasons for the changes in the rates,
benefits, and cost sharing in the large group market. The meeting
shall be held in either the Los Angeles area or the San Francisco Bay
area.
   (c) A health insurer subject to subdivision (a) shall also
disclose the following for the aggregate rate information for the
large group market submitted under this section:
   (1) For rates effective during the 12-month period ending January
1 of the following year, number and percentage of rate changes
reviewed by the following:
   (A) Plan year.
   (B) Segment type, including whether the rate is community rated,
in whole or in part.
   (C) Product type.
   (D) Number of insureds.
   (E) The number of products sold that have materially different
benefits, cost sharing, or other elements of benefit design.
   (2) For rates effective during the 12-month period ending January
1 of the following year, any factors affecting the base rate, and the
actuarial basis for those factors, including all of the following:
   (A) Geographic region.
   (B) Age, including age rating factors.
   (C) Occupation.
   (D) Industry.
   (E) Health status factors, including, but not limited to,
experience and utilization.
   (F) Employee, and employee and dependents, including a description
of the family composition used.
   (G) Insureds' share of premiums.
   (H) Insureds' cost sharing.
   (I) Covered benefits in addition to basic health care services, as
defined in Section 1345 of the Health and Safety Code, and other
benefits mandated under this article.
   (J) Which market segment, if any, is fully experience rated and
which market segment, if any, is in part experience rated and in part
community rated.
   (K) Any other factor that affects the rate that is not otherwise
specified.
   (3) (A) The insurer's overall annual medical trend factor
assumptions for all benefits and by aggregate benefit category,
including hospital inpatient, hospital outpatient, physician
services, prescription drugs and other ancillary services,
laboratory, and radiology for the applicable 12-month period ending
January 1 of the following year. A health insurer that exclusively
contracts with no more than two medical groups in the state to
provide or arrange for professional medical services for the health
insurer's insureds shall instead disclose the amount of its actual
trend experience for the prior contract year by aggregate benefit
category, using benefit categories, to the maximum extent possible,
that are the same or similar to those used by other insurers.
   (B) The amount of the projected trend separately attributable to
the use of services, price inflation, and fees and risk for annual
policy trends by aggregate benefit category, including hospital
inpatient, hospital outpatient, physician services, prescription
drugs and other ancillary services, laboratory, and radiology. A
health insurer that exclusively contracts with no more than two
medical groups in the state to provide or arrange for professional
medical services for the insureds shall instead disclose the amount
of its actual trend experience for the prior contract year by
aggregate benefit category, using benefit categories that are, to the
maximum extent possible, the same or similar to those used by other
insurers.
   (C) A comparison of the aggregate per insured per month costs and
rate of changes over the last five years for each of the following:
   (i) Premiums.
   (ii) Claims costs, if any.
   (iii) Administrative expenses.
   (iv) Taxes and fees.
   (D) Any changes in insured cost sharing over the prior year
associated with the submitted rate information, including both of the
following:
   (i) Actual copays, coinsurance, deductibles, annual out of pocket
maximums, and any other cost sharing by the benefit categories
determined by the department.
   (ii) Any aggregate changes in insured cost sharing over the prior
years as measured by the weighted average actuarial value, weighted
by the number of insureds.
   (E) Any changes in insured benefits over the prior year, including
a description of benefits added or eliminated as well as any
aggregate changes as measured as a percentage of the aggregate claims
costs, listed by the categories determined by the department.
   (F) Any cost containment and quality improvement efforts made
since the insurer's prior year's information pursuant to this section
for the same category of health insurer. To the extent possible, the
insurer shall describe any significant new health care cost
containment and quality improvement efforts and provide an estimate
of potential savings together with an estimated cost or savings for
the projection period.
   (G) The number of products covered by the information that
incurred the excise tax paid by the health insurer.
   (d) The information required pursuant to this section shall be
submitted to the department on or before October 1, 2016, and on or
before October 1 annually thereafter. Information submitted pursuant
to this section is subject to Section 10181.7.
  SEC. 4.  Section 10199.1 of the Insurance Code is amended to read:
   10199.1.  (a) (1) An insurer or nonprofit hospital service plan or
administrator acting on its behalf shall not terminate a group
master policy or contract providing hospital, medical, or surgical
benefits, increase premiums or charges therefor, reduce or eliminate
benefits thereunder, or restrict eligibility for coverage thereunder
without providing prior notice of that action. The action shall not
become effective unless written notice of the action was delivered by
mail to the last known address of the appropriate insurance producer
and the appropriate administrator, if any, at least 45 days prior to
the effective date of the action and to the last known address of
the group policyholder or group contractholder at least 60 days prior
to the effective date of the action. If nonemployee certificate
holders or employees of more than one employer are covered under the
policy or contract, written notice shall also be delivered by mail to
the last known address of each nonemployee certificate holder or
affected employer or, if the action does not affect all employees and
dependents of one or more employers, to the last known address of
each affected employee certificate holder, at least 60 days prior to
the effective date of the action.
   (2) The notice delivered pursuant to paragraph (1) for large group
health insurance policies shall also include the following
information:
   (A) Whether the rate proposed to be in effect is greater than the
average rate increase for individual market products negotiated by
the California Health Benefit Exchange for the most recent calendar
year for which the rates are final.
   (B) Whether the rate proposed to be in effect is greater than the
average rate increase negotiated by the Board of Administration of
the Public Employees' Retirement System for the most recent calendar
year for which the rates are final.
   (C) Whether the rate change includes any portion of the excise tax
paid by the health insurer.
   (b) A holder of a master group policy or a master group nonprofit
hospital service plan contract or administrator acting on its behalf
shall not terminate the coverage of, increase premiums or charges
for, or reduce or eliminate benefits available to, or restrict
eligibility for coverage of a covered person, employer unit, or class
of certificate holders covered under the policy or contract for
hospital, medical, or surgical benefits without first providing prior
notice of the action. The action shall not become effective unless
written notice was delivered by mail to the last known address of
each affected nonemployee certificate holder or employer, or if the
action does not affect all employees and dependents of one or more
employers, to the last known address of each affected employee
certificate holder, at least 60 days prior to the effective date of
the action.
   (c) A health insurer that declines to offer coverage to or denies
enrollment for a large group applying for coverage shall, at the time
of the denial of coverage, provide the applicant with the specific
reason or reasons for the decision in writing, in clear, easily
understandable language.
  SEC. 5.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.