CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 2499

Introduced by Assembly Member Arambula

February 14, 2018

An act to amend Section 1367.003 of the Health and Safety Code, and to amend Section 10112.25 of the Insurance Code, relating to health care coverage.


LEGISLATIVE COUNSEL'S DIGEST


AB 2499, as introduced, Arambula. Health care coverage: medical loss ratios.
Existing 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 provides for the regulation of health insurers by the Department of Insurance.
Existing law requires a health care service plan or health insurer that issues, sells, renews, or offers a health care service plan contract or health insurance policy, respectively, for health care coverage in this state to comply with minimum medical loss ratios, and to provide an annual rebate to each enrollee or insured under that coverage, on a pro rata basis, if the medical loss ratio of the amount of premium revenue expended by the plan or health insurer on the costs for reimbursement for clinical services and for activities that improve health care quality to the total amount of premium revenue is less than a certain percentage.
This bill would increase the minimum medical loss ratio percentages applicable to health care service plans and health insurers by 5%, except as specified. By increasing the number of health care service plans that would be required to pay a rebate, the bill would increase potential violations of an existing crime, thereby imposing a state-mandated local program.
Existing law requires the adoption of emergency regulations, pursuant to consultation between the departments, to implement those provisions. Existing law requires the medical loss ratio provisions to be implemented to the extent required by federal law and to comply with, and not exceed, the scope of specified federal laws, rules, and regulations.
This bill would repeal the emergency regulation and consultation requirements. The bill would revise the requirements relating to the specified federal provisions, to require instead that the medical loss ratio provisions be consistent with those federal provisions as in effect on January 1, 2017. The bill would delete certain obsolete provisions and would make other technical, nonsubstantive changes.
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.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 Section 1367.003 of the Health and Safety Code is amended to read:

1367.003.
 (a) Every A health care service plan that issues, sells, renews, or offers health care service plan contracts for health care coverage in this state, including a grandfathered health plan, but not including specialized health care service plan contracts, shall provide an annual rebate to each enrollee under such that coverage, on a pro rata basis, if the ratio of the amount of premium revenue expended by the health care service plan on the costs for reimbursement for clinical services provided to enrollees under such that coverage and for activities that improve health care quality to the total amount of premium revenue, excluding federal and state taxes and licensing or regulatory fees and after accounting for payments or receipts for risk adjustment, risk corridors, and reinsurance, is less than the following:
(1) With respect to a health care service plan offering coverage in the large group market, 85 90 percent.
(2) With respect to a health care service plan offering coverage in the small group market or in the individual market, 80 85 percent.
(b) Every A health care service plan that issues, sells, renews, or offers health care service plan contracts for health care coverage in this state, including a grandfathered health plan, shall comply with the following minimum medical loss ratios:
(1) With respect to a health care service plan offering coverage in the large group market, 85 90 percent.
(2) With respect to a health care service plan offering coverage in the small group market or in the individual market, 80 percent.
(3) With respect to a health care service plan offering coverage in the individual market, 85 percent.
(c) (1) The total amount of an annual rebate required under this section shall be calculated in an amount equal to the product of the following:
(A) The amount by which the percentage described in paragraph (1) or (2) of subdivision (a) exceeds the ratio described in paragraph (1) or (2) of subdivision (a).
(B) The total amount of premium revenue, excluding federal and state taxes and licensing or regulatory fees and after accounting for payments or receipts for risk adjustment, risk corridors, and reinsurance.
(2) A health care service plan shall provide any a rebate owing to an enrollee no later than August 1 of the calendar year following the year for which the ratio described in subdivision (a) was calculated.
(d) (1)The director may adopt regulations in accordance with the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) that are necessary to implement the medical loss ratio as described under Section 2718 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-18), and any federal rules or regulations issued under that section.

(2)The director may also adopt emergency regulations in accordance with the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) when it is necessary to implement the applicable provisions of this section and to address specific conflicts between state and federal law that prevent implementation of federal law and guidance pursuant to Section 2718 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-18). The initial adoption of the emergency regulations shall be deemed to be an emergency and necessary for the immediate preservation of the public peace, health, safety, or general welfare.

(e)The department shall consult with the Department of Insurance in adopting necessary regulations, and in taking any other action for the purpose of implementing this section.

(f)

(e) This section shall be implemented to the extent required by federal law and shall comply with, and not exceed, the scope of consistent with Section 2791 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-91) and the requirements of Section 2718 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-18) and any rules or regulations issued under those sections. sections as in effect on January 1, 2017.

(g)Nothing in this section shall be construed to

(f) This section does not apply to provisions of this chapter pertaining to financial statements, assets, liabilities, and other accounting items to which subdivision (s) of Section 1345 applies.

(h)Nothing in this section shall be construed to

(g) This section does not apply to a health care service plan contract or insurance policy issued, sold, renewed, or offered for health care services or coverage provided in the Medi-Cal program (Chapter 7 (commencing with Section 14000) of Part 3 of Division 9 of the Welfare and Institutions Code), the Healthy Families Program (Part 6.2 (commencing with Section 12693) of Division 2 of the Insurance Code), the Access for Infants and Mothers Program (Part 6.3 (commencing with Section 12695) of Division 2 of the Insurance Code), the California Major Risk Medical Insurance Program (Part 6.5 (commencing with Section 12700) of Division 2 of the Insurance Code), or the Federal Temporary High Risk Insurance Pool (Part 6.6 (commencing with Section 12739.5) of Division 2 of the Insurance Code), to the extent consistent with the federal Patient Protection and Affordable Care Act (Public Law 111-148). Code).

SEC. 2.

 Section 10112.25 of the Insurance Code is amended to read:

10112.25.
 (a) Every A health insurer that issues, sells, renews, or offers health insurance policies for health care coverage in this state, including a grandfathered health plan, but not including specialized health insurance policies, shall provide an annual rebate to each insured under such that coverage, on a pro rata basis, if the ratio of the amount of premium revenue expended by the health insurer on the costs for reimbursement for clinical services provided to insureds under such that coverage and for activities that improve health care quality to the total amount of premium revenue, excluding federal and state taxes and licensing or regulatory fees and after accounting for payments or receipts for risk adjustment, risk corridors, and reinsurance, is less than the following:
(1) With respect to a health insurer offering coverage in the large group market, 85 90 percent.
(2) With respect to a health insurer offering coverage in the small group market or in the individual market, 80 85 percent.
(b) Every A health insurer that issues, sells, renews, or offers health insurance policies for health care coverage in this state, including a grandfathered health plan, shall comply with the following minimum medical loss ratios:
(1) With respect to a health insurer offering coverage in the large group market, 85 90 percent.
(2) With respect to a health insurer offering coverage in the small group market or in the individual market, 80 percent.
(3) With respect to a health insurer offering coverage in the individual group market, 85 percent.
(c) (1) The total amount of an annual rebate required under this section shall be calculated in an amount equal to the product of the following:
(A) The amount by which the percentage described in paragraph (1) or (2) of subdivision (a) exceeds the ratio described in paragraph (1) or (2) of subdivision (a).
(B) The total amount of premium revenue, excluding federal and state taxes and licensing or regulatory fees and after accounting for payments or receipts for risk adjustment, risk corridors, and reinsurance.
(2) A health insurer shall provide any a rebate owing to an insured no later than August 1 of the calendar year following the year for which the ratio described in subdivision (a) was calculated.
(d) (1)The commissioner may adopt regulations in accordance with the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) that are necessary to implement the medical loss ratio as described under Section 2718 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-18), and any federal rules or regulations issued under that section.

(2)The commissioner may also adopt emergency regulations in accordance with the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) when it is necessary to implement the applicable provisions of this section and to address specific conflicts between state and federal law that prevent implementation of federal law and guidance pursuant to Section 2718 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-18). The initial adoption of the emergency regulations shall be deemed to be an emergency and necessary for the immediate preservation of the public peace, health, safety, or general welfare.

(e)The department shall consult with the Department of Managed Health Care in adopting necessary regulations, and in taking any other action for the purpose of implementing this section.

(f)

(e) This section shall be implemented to the extent required by federal law and shall comply with, and not exceed, the scope of consistent with Section 2791 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-91) and the requirements of Section 2718 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-18) and any rules or regulations issued under those sections. sections as in effect on January 1, 2017.

(g)Nothing in this section shall be construed to

(f) This section does not apply to a health care service plan contract or insurance policy issued, sold, renewed, or offered for health care services or coverage provided in the Medi-Cal program (Chapter 7 (commencing with Section 14000) of Part 3 of Division 9 of the Welfare and Institutions Code), the Healthy Families Program (Part 6.2 (commencing with Section 12693)), the Access for Infants and Mothers Program (Part 6.3 (commencing with Section 12695)), the California Major Risk Medical Insurance Program (Part 6.5 (commencing with Section 12700)), or the Federal Temporary High Risk Insurance Pool (Part 6.6 (commencing with Section 12739.5)), to the extent consistent with the federal Patient Protection and Affordable Care Act (Public Law 111-148). Code).

SEC. 3.

 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.