text:
Premiums for benefit plan designs written, issued, or administered by carriers on or after the effective date of this act, 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 120 percent or less than 80 percent of the carrier’s applicable standard employee risk rate until July 1, 1996. Effective July 1, 1996, 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 six 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 rates may not be more than 120 percent or less than 80 percent of the carrier’s applicable standard employee risk rate until July 1, 1996. Effective July 1, 1996, the risk adjusted employee risk rate may not be more than 110 percent or less than 90 percent. The factor effective July 1, 1996, shall apply to in force business at the earlier of either the time of renewal or July 1, 1997. 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 no less than six months.

(3) For a benefit plan design that a carrier has discontinued offering, the risk adjustment factor applied to the standard employee risk rates for the first rating period of the new benefit plan design that the small employer elects to purchase shall be no greater than the risk adjustment factor applied in the prior rating period to the discontinued benefit plan design. However, the risk adjusted employee rate may not be more than 120 percent or less than 80 percent of the carrier’s applicable standard employee risk rate until July 1, 1996. Effective July 1, 1996, the risk adjusted employee risk rate may not be more than 110 percent or less than 90 percent. The factor effective July 1, 1996, shall apply to in force business at the earlier of either the time of renewal or July 1, 1997. The risk adjustment factor for a small employer may not be modified more frequently than every 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 either new business or 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 no less than six months, nor more than 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.

history: (History: Amended by Stats. 1996, Ch. 50, Sec. 2. Effective May 24, 1996.)

article: 2. Small Employer Carrier Requirements


kind: section

code: INS

text: Carriers shall apply standard employee risk rates consistently with respect to all small employers.

history: (History: Added by Stats. 1992, Ch. 1128, Sec. 10. Effective January 1, 1993. Operative July 1, 1993, by Sec. 15 of Ch. 1128.)

division: 2. CLASSES OF INSURANCE

part: 2. LIFE AND DISABILITY INSURANCE

chapter: 8. Small Employer Health Insurance

article: 2. Small Employer Carrier Requirements

path: 2. CLASSES OF INSURANCE > 2. LIFE AND DISABILITY INSURANCE > 8. Small Employer Health Insurance > 2. Small Employer Carrier Requirements


text:
In connection with the offering for sale of any benefit plan design 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 or actual or expected variation in health conditions 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 effect of any preexisting condition provision.

(e) Provisions relating to the small employer’s right to apply for any benefit plan design 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.

(f) The availability, upon request, of a listing of all the carrier’s benefit plan designs, including the rates for each benefit plan design.

article: 2. Small Employer Carrier Requirements


text:
(a) No carrier shall provide or 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 benefit plan designs 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 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 10705, 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 no 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 issue, deliver, renew, or revise a benefit plan design lawfully provided pursuant to subdivision (a), and no carrier shall change the risk categories, risk adjustment factors, or standard employee risk rates for any benefit plan design 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 benefit plan design lawfully provided under (a) or (b) above 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 benefit plan design prior to offering or renewing the benefit plan design.

(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 benefit plan design.

(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.

article: 2. Small Employer Carrier Requirements


text:
(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.

article: 2. Small Employer Carrier Requirements


text:
(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.

article: 2. Small Employer Carrier Requirements


text: 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.

article: 2. Small Employer Carrier Requirements


text:
(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 10714. 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.

history: (History: Amended by Stats. 2002, Ch. 227, Sec. 2. Effective January 1, 2003.)

article: 2. Small Employer Carrier Requirements


text: The California Small Group Reinsurance Fund is hereby authorized to be created solely to allow carriers to share in financing the cost of covering high risk small employer groups. It shall be organized as a nonprofit corporation, which consists of all small employer carriers and small employer health care service plans which elect to participate in the fund pursuant to subdivision (d) of Section 10720. These carriers may cede that portion of risk to the fund that the fund has agreed to accept.

article: 3. Voluntary Reinsurance Mechanism

path: 2. CLASSES OF INSURANCE > 2. LIFE AND DISABILITY INSURANCE > 8. Small Employer Health Insurance > 3. Voluntary Reinsurance Mechanism


text: 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.

history: (History: Amended by Stats. 1996, Ch. 1062, Sec. 25. Effective January 1, 1997.)

article: 3. Voluntary Reinsurance Mechanism


text:
(a) The fund shall be governed by a board of directors, which shall initially be elected by small employer carriers and small employer health care service plans. The initial board shall be elected by a weighted vote based on net health insurance premiums derived from the state in the previous calendar year in the small employer market. The initial board shall consist of at least five and not more than nine representatives of small employer carriers and small employer health care service plans.

(b) Within 180 days of the election of the initial board, the board shall adopt a plan of operation which provides for the reasonable and equitable administration of the fund.

(c) The plan of operation shall, among other things, do all of the following:

(1) Establish procedures to assure the fair, reasonable, and equitable administration of the fund and provide for the sharing of fund gains or losses on an equitable and proportionate basis.

(2) Establish procedures for handling and accounting of program assets and moneys.

(3) Establish terms of office and procedures for filling vacancies on the board.

(4) Establish procedures for reinsuring risks in accordance with the provisions of this chapter.

(5) Establish procedures for collecting assessments from members to provide for claims reinsured by the fund and for administrative expenses incurred or estimated to be incurred during the period for which the assessment is made.

(d) Within 60 days of the board’s adoption of the plan of operation, small employer carriers and small employer health care service plans shall elect to be either a participant or nonparticipant of the fund. All participants of the fund shall be members of the fund, and only members of the fund shall continue to be members of the board. Members may elect new members of the board, if necessary, to replace initial board members who elect to be nonparticipants of the fund, subject to subdivision (a). The election shall be binding for a three-year period. Thereafter, each small employer carrier shall notify the board 90 days prior to the end of the election period whether or not they will be a member of the fund.

article: 3. Voluntary Reinsurance Mechanism


text:
The fund shall have the general powers and authority granted under the laws of California to insurance companies and health care service plans licensed to transact business, except the power to issue health benefit plans directly to either groups or individuals. In addition, thereto, the fund shall have the specific authority to:

(a) Enter into contracts as are necessary or proper to carry out the provisions and purposes of this chapter, including the authority to enter into contracts with similar programs of other states for the joint performance of common functions or with persons or other organizations for the performance of administrative functions.

(b) Sue or be sued, including taking any legal actions necessary or proper for recovering any assessments and penalties for, on behalf of, or against the fund.

(c) Take any legal action necessary to avoid the payment of improper claims against the fund.

(d) Issue reinsurance policies, in accordance with the requirements of this chapter.

(e) Establish rules, conditions, and procedures pertaining to the reinsurance of members’ risk by the fund.

(f) Establish actuarial functions as appropriate for the operation of the fund.

(g) Assess members of the fund and take advance interim assessments as may be reasonable and necessary for organizational and interim operating expenses. Any interim assessments shall be credited as offsets against any regular assessments due following the close of the fiscal year.

(h) Appoint from among fund members appropriate legal, actuarial, and other committees as necessary to provide technical assistance in the operation of the fund, policy and contract design, and any other function within the authority of the fund.

(i) Borrow money to effect the purposes of the fund. Any notes or other evidence of indebtedness of the fund not in default shall be legal investments for fund members and may be carried as admitted assets.

article: 3. Voluntary Reinsurance Mechanism


text: The fund shall provide for the financing of its reinsurance and operating costs, including actuarially sound reserves for unpaid losses, by charging members a reinsurance contribution and, as necessary, making assessments and collections from members in proportion to their participation in the program. Neither the state or any officer, agent, or employee shall be liable for any costs of the fund, or for any debts or liabilities incurred by the fund.

article: 3. Voluntary Reinsurance Mechanism


text: If assessments exceed actual losses and administrative expenses of the fund, the excess shall be held at interest and used by the fund to offset future losses or to reduce fund premiums. As used in this paragraph, “future losses” includes reserves for incurred but not reported claims.

article: 3. Voluntary Reinsurance Mechanism


text: Any unsatisfied net liability or outstanding assessment owed by an insolvent member participating in the fund shall be assumed by and apportioned among the remaining members in the fund in the same manner in which assessments are levied by the fund. The fund shall have all rights allowed by law on behalf of the remaining members against the insolvent member for sums due the fund.

article: 3. Voluntary Reinsurance Mechanism


text: Carriers choosing to participate shall comply with all requirements for participation established by the fund.

article: 3. Voluntary Reinsurance Mechanism


text: The fund’s board of directors shall establish the rules, conditions, and procedures pertaining to the reinsurance of members’ risks by the fund.

article: 3. Voluntary Reinsurance Mechanism


text: Nothing in this article relieves members of participating in the fund from complying with the underwriting and rating provisions included in Article 1 (commencing with Section 10700) and Article 2 (commencing with Section 10702) in the case of small employer carriers, or in Article 3.1 (commencing with Section 1357) and with Article 3.14 (commencing with Section 1357.50) of the Health and Safety Code, in the case of small employer health care service plans.

article: 3. Voluntary Reinsurance Mechanism


text: The fund shall be exempt from any and all taxes.

article: 3. Voluntary Reinsurance Mechanism


text: For purposes of agreements entered into pursuant to this article, the fund, and its officers, directors, agents, and employees shall have no liability for any damages other than actual damages.

article: 3. Voluntary Reinsurance Mechanism


text: The fund shall establish rules, conditions, and procedures relating to the indemnification of any person or member of the fund made a party to any claim, action, suit, or proceeding because the person or member served on the board of directors of the fund, or on a committee, or was an officer or employee of the fund, provided, such rules, conditions, and procedures do not authorize indemnification in excess of that expressly permitted by Section 317 of the Corporations Code.

article: 3. Voluntary Reinsurance Mechanism


text:
(a) The Voluntary Alliance Uniting Employers Purchasing Program is hereby created and shall be administered by the Major Risk Medical Insurance Board.

(b) No member of the Major Risk Medical Insurance Board and no decisionmaker for any nonprofit entity that assumes administrative and fiscal responsibility for operation of the program pursuant to Sections 10748.5 and 10748.6 shall make, participate in making, or in any way attempt to use his or her official position to influence the making of any decision that he or she knows or has reason to know will have a reasonably foreseeable material financial effect, distinguishable from its effect on the public generally, on him or her or a member of his or her immediate family, or on any of the following:

(1) Any source of income, other than gifts and other than loans by a commercial lending institution in the regular course of business on terms available to the public without regard to official status aggregating two hundred fifty dollars ($250) or more in value provided to, received by, or promised to the member of the Major Risk Medical Insurance Board or decisionmaker for a nonprofit entity that assumes administrative and fiscal responsibility for operation of the program pursuant to Sections 10748.5 and 10748.6 within 12 months prior to the time when the decision is made.

(2) Any business entity in which the member of the Major Risk Medical Insurance Board or decisionmaker for a nonprofit entity that assumes administrative and fiscal responsibility for operation of the program pursuant to Sections 10748.5 and 10748.6 is a director, officer, partner, trustee, employee, or holds any position of management.

(c) Commencing January 1, 1994, no member of the Major Risk Medical Insurance Board and no decisionmaker for any nonprofit entity that assumes administrative and fiscal responsibility for the program pursuant to Sections 10748.5 and 10748.6, may be an employee, a consultant or a member of the board of directors of any insurer, hospital service plan or health care service plan, or an insurance broker or agent doing business in California.

article: 4. Purchasing Pool for Small Employers

path: 2. CLASSES OF INSURANCE > 2. LIFE AND DISABILITY INSURANCE > 8. Small Employer Health Insurance > 4. Purchasing Pool for Small Employers


text:
The board may do any of the following:

(a) Enter into contracts with carriers to provide health benefits coverage to eligible employees and their dependents. Any contract entered into pursuant to this part shall be exempt from any provision of law relating to competitive bidding, and shall be exempt from the review or approval of any division of the Department of General Services. The board shall not be required to specify the amounts encumbered for each contract, but may allocate funds to each contract based on projected and actual subscriber enrollments.

(b) Enter into other contracts as are necessary or proper to carry out the provisions of this part.

(c) Employ necessary staff.

(d) Sue or be sued, including taking any legal actions necessary or proper for recovering any penalties for, on behalf of, or against, the program or any board member.

(e) Define the health benefits coverage which the program will contract to purchase from participating carriers.

(f) Appoint committees, as necessary, to provide technical assistance in the operation of the program.

(g) Assess participating employers a reasonable fee for necessary costs in connection with the program.

(h) Undertake activities necessary to administer the program, including marketing and publicizing the program, and assuring carrier, employer, and enrollee compliance with program requirements.

(i) Establish rules, conditions, and procedures for participation for small employers.

(j) Establish rules, conditions, and procedures for participation for participating carriers.

(k) Establish a financial relationship directly with agents or brokers to provide services pursuant to this program.

(l) Approve the benefit plan designs sold by carriers participating in the pool.

(m) Issue rules and regulations as necessary to administer the program. Any rules and regulations issued pursuant to this subdivision may be adopted as 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). Until December 31, 1994, the adoption of these regulations shall be deemed an emergency and necessary for the immediate preservation of the public peace, health, and safety, or general welfare.

(n) Exercise all powers reasonably necessary to carry out the powers and responsibilities expressly granted or imposed by this part.

(o) From money appropriated to the Major Risk Medical Insurance Fund, the Major Risk Medical Insurance Board may loan funds for operating expenses to establish the program. These funds shall be repaid to the Major Risk Medical Insurance Fund prior to transitioning administrative and financial responsibility for the program to a qualified nonprofit entity pursuant to Sections 10748.5 and 10748.6.

history: (History: Amended by Stats. 1993, Ch. 1146, Sec. 9.7. Effective October 11, 1993.)

article: 4. Purchasing Pool for Small Employers


history: (History: Amended by Stats. 1996, Ch. 1062, Sec. 26. Effective January 1, 1997.)

article: 4. Purchasing Pool for Small Employers


text: The board shall establish geographic areas within which participating carriers may offer health coverage to eligible employees and dependents.

article: 4. Purchasing Pool for Small Employers


text:
On or after the effective date of this chapter, the board shall enter into contracts with carriers for the purpose of providing health benefits coverage to eligible employees and dependents. Participating carriers shall have, but need not be limited to, all of the following operating characteristics satisfactory to the board:

(a) Strong financial condition, including the ability to assume the risk of providing and paying for covered services. A participating carrier may utilize reinsurance, provider risk sharing, and other appropriate mechanisms to share a portion of the risk.

(b) Adequate administrative management.

(c) In the case of the health care service plan, the following requirements must be met: (1) on the effective date of the contract, the health care service plan must be in compliance with the minimum tangible net equity requirements of the Director of the Department of Managed Health Care as those requirements will be in effect on January 1, 1995, and must remain in compliance with these requirements throughout the duration of the contract; (2) (A) before the effective date of the contract, the health care service plan must have devised a system for identifying in a simple and clear fashion both in its own records and in the medical records of subscribers and enrollees the fact that the services provided are provided under the program; and (B) throughout the duration of the contract, the health care service plan must use that system; and (3) at least 30 days before the effective date of any contract with the board, the health care service plan must inform the Director of the Department of Managed Health Care in writing of the health care service plan’s intent to enter into the contract and must demonstrate in that letter, to the satisfaction of the Director of the Department of Managed Health Care, that it has complied with the requirements of paragraphs (1) and (2).

(d) A satisfactory grievance procedure.

(e) Participating carriers that contract with or employ health care providers shall have mechanisms to accomplish all of the following, in a manner satisfactory to the board, in consultation with the carrier’s licensing agency.

(1) Review the quality of care covered.

(2) Review the appropriateness of care covered.

(3) Provide accessible health care services.

history: (History: Amended by Stats. 2000, Ch. 857, Sec. 68. Effective January 1, 2001.)

article: 4. Purchasing Pool for Small Employers


text: Notwithstanding any other provision of law, an employer purchasing coverage through the program shall not be determined to be no longer eligible to participate in the program solely because the employer employs more than 50 eligible employees, provided the employer employs no more than 100 eligible employees.

history: (History: Added by Stats. 1993, Ch. 1146, Sec. 10. Effective October 11, 1993.)

article: 4. Purchasing Pool for Small Employers


text:
(a) Notwithstanding any other provision of law, the board shall not be subject to licensure or regulation by the Department of Insurance or the Department of Managed Health Care, as the case may be.

(b) Participating carriers that contract with the program shall be licensed and in good standing with their licensing agencies.

history: (History: Amended by Stats. 2000, Ch. 857, Sec. 69. Effective January 1, 2001.)

article: 4. Purchasing Pool for Small Employers


text:
The board shall contract with a broad range of carriers in an area, if available, to ensure that enrollees have a choice from among a reasonable number and types of competing carriers. The board shall develop and make available objective criteria for carrier selection and provide adequate notice of the application process to permit all carriers a reasonable and fair opportunity to participate. The criteria and application process shall allow participating carriers to comply with their state and federal licensing and regulatory obligations, except as otherwise provided in this chapter. Carrier selection shall be based on the criteria developed by the board.

The administrator shall not eliminate any carrier from selection solely because of the carrier’s size or limited service area.

article: 4. Purchasing Pool for Small Employers


text: The board shall use appropriate and efficient means to notify small employers of the availability of sponsored health coverage from the program.

article: 4. Purchasing Pool for Small Employers


text: The board shall make available to small employers marketing materials that accurately summarize the benefits plans and rates that are offered by the carrier through the program.

article: 4. Purchasing Pool for Small Employers


text: Unless authorized by the board, no participating carrier shall, in an area served by the program, directly, or through an employee, agent, or contractor, provide a small group or enrollee with any marketing material relating to benefits or rates provided under the program.

article: 4. Purchasing Pool for Small Employers


text: Participating carriers may contract with agents or brokers to provide marketing and servicing of health benefits coverage offered through the program. Any commissions set and paid pursuant to this section shall be determined by the participating carrier and the agent or broker.

article: 4. Purchasing Pool for Small Employers


text: The board shall enforce conditions of participation in the program for small employers and enrollees which shall conform with the requirements of this chapter.

article: 4. Purchasing Pool for Small Employers


text: The board shall establish a mechanism to collect premiums from small employers, including remittance of the share of the premium paid by the enrollee.

article: 4. Purchasing Pool for Small Employers


text: The board may prohibit employers or employees who drop coverage after enrolling in the pool from reenrolling in the program for up to 12 months.

article: 4. Purchasing Pool for Small Employers


text: The board shall arrange to pay contractors as specified in program contracts.

article: 4. Purchasing Pool for Small Employers


text: The board shall pay participating carriers their contracted rates.

article: 4. Purchasing Pool for Small Employers


text: Participating carriers shall offer rates to small employers or enrollees in the program that, at a minimum, are consistent with the program regulations and existing statutes and regulations regulating health insurance offerings to small employers.

article: 4. Purchasing Pool for Small Employers


text: The board may adjust payments made to a carrier if the board finds that the carrier has a significantly disproportionate share of high- or low-risk enrollees. Prior to making this finding, the program shall obtain valid data from participating carriers. Reporting requirements shall be administratively compatible with the methods of operation of the carrier. Any adjustments to payments shall be prospective and shall utilize demographic and other factors which are actuarially related to risk.

article: 4. Purchasing Pool for Small Employers


text: If a small employer, employee, or dependent of a small employer is dissatisfied with any action or failure to act which has occurred in connection with eligibility for, or enrollment in the program, the employer or employee shall have the right to appeal to the board and shall be accorded an opportunity for a fair hearing. Hearings shall be conducted, insofar as practicable, pursuant to the provisions of Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code.

article: 4. Purchasing Pool for Small Employers


text:
No later than three years from the effective date of this article, the board shall issue a request for proposals that solicits nonprofit entities to submit bids to assume administrative and fiscal responsibility for operation of the program on a regional basis. The geographic boundaries of the regions shall be designated by the board. The board shall assess bidder’s qualifications in the areas of administrative capacity, financial responsibility, local experience, and demonstrated ability.

Within six months of issuing the request for proposals, the board shall select from among the qualified bidders and award administrative and financial responsibility for the program to the selected regional nonprofit entities. If no qualified nonprofit entity submits a bid pursuant to the board’s request for proposals, one year from the date that bids were due the board shall reissue a request for proposals if the board has reason to believe that there is a possibility for a response from a qualified nonprofit entity.

The board shall provide for an orderly transition of administrative and financial responsibility for the program.

article: 4. Purchasing Pool for Small Employers


text: The board shall accept and review proposals submitted from nonprofit entities for assumption of administrative and financial responsibility of the program at any time prior to the process described in Section 10748.5. If the board determines that a qualified entity exists, the board may relinquish administrative and financial responsibility for the program to the nonprofit entity. Any contract entered into pursuant to this section shall be exempt from any provision of law relating to competitive bidding and shall be exempt from the review or approval of any division of the Department of General Services.

article: 4. Purchasing Pool for Small Employers


text: There is in the program a five-member small employer advisory panel to be appointed by the board to provide consultation to the board on program design and implementation. The composition of the panel shall reflect varying sizes of small employers and a variety of occupational categories.

article: 4. Purchasing Pool for Small Employers


text: There is created a Voluntary Alliance Uniting Employers Fund which shall consist of moneys collected pursuant to this article and any funds loaned by the board for operating expenses. Moneys in the fund shall be continuously appropriated without regard to fiscal year, to the board for the purposes specified in this part. Costs of the Voluntary Alliance for Uniting Employers Purchasing Program shall not be paid with state funds other than funds loaned by the board for operating expenses. Moneys within the fund shall be utilized for the purposes of this article.

article: 4. Purchasing Pool for Small Employers


text: This chapter shall not apply to a health benefit plan that is subject to Chapter 8.01 (commencing with Section 10753) or Chapter 8.02 (commencing with Section 10755), except as otherwise provided in those chapters.

history: (History: Added by Stats. 2012, Ch. 852, Sec. 13. (AB 1083) Effective January 1, 2013.)

article: 4. Purchasing Pool for Small Employers


text:
As used in this article, the following definitions shall apply:

(a) “Attachment point” means the amount of health claims incurred by a small employer in a policy year for its employees and their dependents, and covered by a stop-loss insurance policy, above which the stop-loss insurer incurs a liability for payment.

(1) “Individual attachment point” means the amount of health claims incurred by a small employer in a policy year for an individual employee or dependent of an employee, and covered by a stop-loss insurance policy, above which the stop-loss insurer incurs a liability for payment, under individual stop-loss coverage. For purposes of this article, “specific attachment point” has the same meaning as “individual attachment point.”

(2) “Aggregate attachment point” means the total amount of health claims incurred by a small employer in a policy year for all covered employees and their dependents, and covered by a stop-loss insurance policy, above which the stop-loss insurer incurs a liability for payment under aggregate stop-loss coverage.

(b) “Dependent” means the spouse, registered domestic partner as described in Section 297 of the Family Code, or child of an employee.

(c) “Direct coverage” means that an insurance company assumes a direct obligation to an employee under an insurance policy to pay or indemnify the employee for health claims incurred by the employee or the employee’s dependents.

(d) “Expected claims” means, for the purposes of aggregate stop-loss coverage, the total amount of health claims that is projected to be incurred by a small employer for its employees and their dependents in a policy year.

(e) “Policy year” means the 12-month period that is designated as the policy year or policy period for the stop-loss insurance policy. If the stop-loss insurance policy does not designate a policy year, the policy year is the year in which the total amount of health claims incurred by a small employer for an individual employee or dependent of an employee, or the aggregate amount for all covered employees and their dependents, are added together for the purposes of determining whether the claims have exceeded the attachment point.

(f) “Small employer” has the same meaning as defined in subdivision (q) of Section 10753.

(g) “Stop-loss insurer” means an insurance company providing individual or aggregate stop-loss insurance coverage, or both, or any other assumption of risk, to a small employer for the health claims it incurs for its employees and their dependents.

(h) “Stop-loss insurance policy” means a policy, contract, certificate, or statement of coverage between a stop-loss insurer and small employer providing individual or aggregate stop-loss insurance coverage, or both, or any other assumption of risk, to a small employer for the liability the small employer incurs related to the covered health claims of its employees and their dependents.

history: (History: Added by Stats. 2013, Ch. 443, Sec. 1. (SB 161) Effective January 1, 2014.)

article: 5. Stop-Loss Insurance

path: 2. CLASSES OF INSURANCE > 2. LIFE AND DISABILITY INSURANCE > 8. Small Employer Health Insurance > 5. Stop-Loss Insurance


text: A stop-loss insurer shall not exclude any employee or dependent on the basis of an actual or expected health status-related factor. Health status-related factors include, but are not limited to, any of the following: health status; medical condition, including both physical and mental illnesses; claims experience; medical history; receipt of health care; genetic information; disability; evidence of insurability, including conditions arising out of acts of domestic violence of the employee or dependent; or any other health status-related factor as determined by the department.

article: 5. Stop-Loss Insurance


text:
A stop-loss insurer shall renew, at the option of the small employer, all stop-loss insurance policies written, issued, administered, or renewed on or after January 1, 2014, and all small employer stop-loss insurance policies in force on or after January 1, 2014, except as follows:

(a) (1) For nonpayment of the required premiums by the small employer, if the 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.

(2) A stop-loss insurer shall continue to provide coverage as required by the small employer’s policy during the grace period described in paragraph (1). Nothing in this section shall be construed to affect or impair the small employer’s or the stop-loss insurer’s other rights and responsibilities pursuant to the policy.

(b) Where the stop-loss insurer demonstrates fraud or an intentional misrepresentation of material fact by the small employer under the terms of the stop-loss insurance policy.

(c) Where the stop-loss insurer has been determined by the commissioner to be financially impaired.

(d) Where the stop-loss insurer ceases to write, issue, or administer new stop-loss insurance policies 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 stop-loss insurance policies in this state is provided to the commissioner, and to the small employer, at least 180 days prior to the discontinuation of the coverage.

(2) Stop-loss insurance policies subject to this article shall not be canceled until 180 days after the date of the notice required under paragraph (1). During that time, the stop-loss insurer shall continue to comply with this article.

article: 5. Stop-Loss Insurance


text:
A stop-loss insurance policy issued, reissued, or renewed on or after January 1, 2014, and prior to January 1, 2016, to a small employer shall not contain any of the following provisions:

(a) An individual attachment point for a policy year that is less than thirty-five thousand dollars ($35,000).

(b) An aggregate attachment point for a policy year that is less than the greater of one of the following:

(1) Five thousand dollars ($5,000) times the total number of group members.

(2) One hundred twenty percent of expected claims.

(3) Thirty-five thousand dollars ($35,000).

(c) A provision for direct coverage of an employee or dependent of an employee.

article: 5. Stop-Loss Insurance


text:
A stop-loss insurance policy issued, reissued, or renewed on or after January 1, 2016, to a small employer shall not contain any of the following provisions:

(a) An individual attachment point for a policy year that is less than forty thousand dollars ($40,000).

(b) An aggregate attachment point for a policy year that is less than the greater of one of the following:

(1) Five thousand dollars ($5,000) times the total number of group members.

(2) One hundred twenty percent of expected claims.

(3) Forty thousand dollars ($40,000).

(c) A provision for direct coverage of an employee or dependent of an employee.

article: 5. Stop-Loss Insurance


text: The commissioner may adopt regulations as may be necessary to carry out the purposes of this article. In adopting regulations, the commissioner shall comply with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.

article: 5. Stop-Loss Insurance


text: A stop-loss insurer that violates the provisions of this article is subject to the remedies and administrative penalties applicable to insurers in Sections 10718 and 10718.5.

article: 5. Stop-Loss Insurance


text: Nothing in this article shall affect the ongoing operations of multiple employer welfare arrangements regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 that provide health care benefits to their members on a self-funded or partially self-funded basis and that comply with small group health reforms.

article: 5. Stop-Loss Insurance


text: The provisions of this article are severable. If any provision of this article or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

article: 5. Stop-Loss Insurance


text: Sections 10752.3 and 10752.4 do not apply to a stop-loss insurance policy provided to a small employer that was in effect prior to September 1, 2013. A stop-loss insurance policy that was in effect prior to September 1, 2013, may be renewed or reissued, or a stop-loss insurance policy may be issued by another stop-loss insurer to maintain continuity of stop-loss coverage for a small employer who had a stop-loss insurance policy in effect prior to September 1, 2013, provided that a stop-loss policy issued to maintain continuity of coverage shall have attachment points that are the same as or higher than the attachment points that were in place in the policy held by the small employer prior to September 1, 2013.

article: 5. Stop-Loss Insurance


text: On April 1, 2014, and on April 1 annually thereafter, a stop-loss insurer shall report to the Department of Insurance the number of small employer stop-loss policies it had issued and in effect as of December 31 of the previous year. The information shall include new policies issued and policies reissued or renewed in the previous year for groups that have 1 to 50 employees and 51 to 100 employees.

article: 5. Stop-Loss Insurance


text:
(a) “Agent or broker” means a person or entity licensed under Chapter 5 (commencing with Section 1621) of Part 2 of Division 1.

(b) “Benefit plan design” means a specific health coverage product issued by a carrier to small employers, to trustees of associations that include small employers, or to individuals if the coverage is offered through employment or sponsored by an employer. It includes services covered and the levels of copayment and deductibles, and it may include the professional providers who are to provide those services and the sites where those services are to be provided. A benefit plan design may also be an integrated system for the financing and delivery of quality health care services which has significant incentives for the covered individuals to use the system.

(c) “Carrier” means a health insurer or any other entity that writes, issues, or administers health benefit plans that cover the employees of small employers, regardless of the situs of the contract or master policyholder.

(d) “Child” means a child described in Section 22775 of the Government Code and subdivisions (n) to (p), inclusive, of Section 599.500 of Title 2 of the California Code of Regulations.

(e) “Dependent” means the spouse or registered domestic partner, or child, of an eligible employee, subject to applicable terms of the health benefit plan covering the employee, and includes dependents of guaranteed association members if the association elects to include dependents under its health coverage at the same time it determines its membership composition pursuant to subdivision (s).

(f) “Eligible employee” means either of the following:

(1) Any permanent employee who is actively engaged on a full-time basis in the conduct of the business of the small employer with a normal workweek of an average of 30 hours per week over the course of a month, in the small employer’s regular place of business, who has met any statutorily authorized applicable waiting period requirements. The term does not include sole proprietors or the spouses of those sole proprietors, partners of a partnership or the spouses of those partners, or employees who work on a part-time, temporary, or substitute basis. It includes any eligible employee, as defined in this paragraph, who obtains coverage through a guaranteed association. Employees of employers purchasing through a guaranteed association are eligible employees if they would otherwise meet the definition except for the number of persons employed by the employer. A permanent employee who works at least 20 hours but not more than 29 hours is an eligible employee if all four of the following apply:

(A) The employee otherwise meets the definition of an eligible employee except for the number of hours worked.

(B) The employer offers the employee health coverage under a health benefit plan.

(C) All similarly situated individuals are offered coverage under the health benefit plan.

(D) The employee shall have worked at least 20 hours per normal workweek for at least 50 percent of the weeks in the previous calendar quarter. The insurer may request any necessary information to document the hours and time period in question, including, but not limited to, payroll records and employee wage and tax filings.

(2) Any member of a guaranteed association as defined in subdivision (s).

(g) “Enrollee” means an eligible employee or dependent who receives health coverage through the program from a participating carrier.

(h) “Exchange” means the California Health Benefit Exchange created by Section 100500 of the Government Code.

(i) “Financially impaired” means, for the purposes of this chapter, a carrier that, on or after the effective date of this chapter, is not insolvent and is either:

(1) Deemed by the commissioner to be potentially unable to fulfill its contractual obligations.

(2) Placed under an order of rehabilitation or conservation by a court of competent jurisdiction.

(j) “Health benefit plan” means a policy of health insurance, as defined in Section 106, for the covered eligible employees of a small employer and their dependents. The term does not include coverage of Medicare services pursuant to contracts with the United States government, or coverage that provides excepted benefits, as described in Sections 2722 and 2791 of the federal Public Health Service Act, subject to Section 10701.

(k) “In force business” means an existing health benefit plan issued by the carrier to a small employer.

(l) “Late enrollee” means an eligible employee or dependent who has declined health coverage under a health benefit plan offered by a small employer at the time of the initial enrollment period provided under the terms of the health benefit plan consistent with the periods provided pursuant to Section 10753.05 and who subsequently requests enrollment in a health benefit plan of that small employer, except where the employee or dependent qualifies for a special enrollment period provided pursuant to Section 10753.05. It also means any member of an association that is a guaranteed association as well as any other person eligible to purchase through the guaranteed association when that person has failed to purchase coverage during the initial enrollment period provided under the terms of the guaranteed association’s health benefit plan consistent with the periods provided pursuant to Section 10753.05 and who subsequently requests enrollment in the plan, except where the employee or dependent qualifies for a special enrollment period provided pursuant to Section 10753.05.

(m) “New business” means a health benefit plan issued to a small employer that is not the carrier’s in force business.

(n) “Preexisting condition provision” means a policy provision that excludes coverage for charges or expenses incurred during a specified period following the insured’s effective date of coverage, as to a condition for which medical advice, diagnosis, care, or treatment was recommended or received during a specified period immediately preceding the effective date of coverage.

(o) “Creditable coverage” means:

(1) Any individual or group policy, contract, or program, that is written or administered by a health insurer, health care service plan, fraternal benefits society, self-insured employer plan, or any other entity, in this state or elsewhere, and that arranges or provides medical, hospital, and surgical coverage not designed to supplement other private or governmental plans. The term includes continuation or conversion coverage but does not include accident only, credit, coverage for onsite medical clinics, disability income, Medicare supplement, long-term care, dental, vision, coverage issued as a supplement to liability insurance, insurance arising out of a workers’ compensation or similar law, automobile medical payment insurance, or insurance under which benefits are payable with or without regard to fault and that is statutorily required to be contained in any liability insurance policy or equivalent self-insurance.

(2) The federal Medicare Program pursuant to Title XVIII of the federal Social Security Act (42 U.S.C. Sec. 1395 et seq.).

(3) The Medicaid program pursuant to Title XIX of the federal Social Security Act (42 U.S.C. Sec. 1396 et seq.).

(4) Any other publicly sponsored program, provided in this state or elsewhere, of medical, hospital, and surgical care.

(5) Chapter 55 (commencing with Section 1071) of Title 10 of the United States Code (Civilian Health and Medical Program of the Uniformed Services (CHAMPUS)).

(6) A medical care program of the Indian Health Service or of a tribal organization.

(7) A health plan offered under Chapter 89 (commencing with Section 8901) of Title 5 of the United States Code (Federal Employees Health Benefits Program (FEHBP)).

(8) A public health plan as defined in federal regulations authorized by Section 2701(c)(1)(I) of the federal Public Health Service Act, as amended by Public Law 104-191, the federal Health Insurance Portability and Accountability Act of 1996.

(9) A health benefit plan under Section 5(e) of the federal Peace Corps Act (22 U.S.C. Sec. 2504(e)).

(10) Any other creditable coverage as defined by subdivision (c) of Section 2704 of Title XXVII of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-3(c)).

(p) “Rating period” means the period for which premium rates established by a carrier are in effect and shall be no less than 12 months from the date of issuance or renewal of the health benefit plan.

(q) (1) “Small employer” means either of the following:

(A) For plan years commencing on or after January 1, 2014, and on or before December 31, 2015, any person, firm, proprietary or nonprofit corporation, partnership, public agency, or association that is actively engaged in business or service, that, on at least 50 percent of its working days during the preceding calendar quarter or preceding calendar year, employed at least one, but no more than 50, eligible employees, the majority of whom were employed within this state, that was not formed primarily for purposes of buying health benefit plans, and in which a bona fide employer-employee relationship exists. For plan years commencing on or after January 1, 2016, any person, firm, proprietary or nonprofit corporation, partnership, public agency, or association that is actively engaged in business or service, that, on at least 50 percent of its working days during the preceding calendar quarter or preceding calendar year, employed at least one, but no more than 100, employees, the majority of whom were employed within this state, that was not formed primarily for purposes of buying health benefit plans, and in which a bona fide employer-employee relationship exists. In determining whether to apply the calendar quarter or calendar year test, a carrier shall use the test that ensures eligibility if only one test would establish eligibility. In determining the number of employees or eligible employees, companies that are affiliated companies and that are eligible to file a combined tax return for purposes of state taxation shall be considered one employer. Subsequent to the issuance of a health benefit plan to a small employer pursuant to this chapter, and for the purpose of determining eligibility, the size of a small employer shall be determined annually. Except as otherwise specifically provided in this chapter, provisions of this chapter that apply to a small employer shall continue to apply until the plan contract anniversary following the date the employer no longer meets the requirements of this definition. It includes any small employer as defined in this subparagraph who purchases coverage through a guaranteed association, any employer purchasing coverage for employees through a guaranteed association, and any small employer as defined in this paragraph who purchases coverage through any arrangement, but does not include multiple employer welfare arrangements regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 that provide health care benefits to their members on a self-funded or partially self-funded basis and that comply with small group health reforms.

(B) Any guaranteed association, as defined in subdivision (r), that purchases health coverage for members of the association.

(2) For plan years commencing on or after January 1, 2019, for purposes of determining whether an employer has one employee, sole proprietors and their spouses, and partners of a partnership and their spouses, are not employees.

(3) For plan years commencing on or after January 1, 2016, the definition of small employer, for purposes of determining employer eligibility in the small employer market, shall be determined using the method for counting full-time employees and full-time equivalent employees set forth in Section 4980H(c)(2) of the Internal Revenue Code.

(r) “Guaranteed association” means 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 employer meeting its membership criteria which (1) includes one or more small employers as defined in subparagraph (A) of paragraph (1) of subdivision (q), (2) does not condition membership directly or indirectly on the health or claims history of any person, (3) 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) is organized and maintained in good faith for purposes unrelated to insurance, (5) has been in active existence on January 1, 1992, and for at least five years prior to that date, (6) has been offering health insurance to its members for at least five years prior to January 1, 1992, (7) has a constitution and bylaws, or other analogous governing documents that provide for election of the governing board of the association by its members, (8) offers any benefit plan design that is purchased to all individual members and employer members in this state, (9) includes any member choosing to enroll in the benefit plan design offered to the association provided that the member has agreed to make the required premium payments, and (10) covers at least 1,000 persons with the carrier with which it contracts. The requirement of 1,000 persons may be met if component chapters of a statewide association contracting separately with the same carrier cover at least 1,000 persons in the aggregate.

This subdivision applies regardless of whether a master policy by an admitted insurer is delivered directly to the association or a trust formed for or sponsored by an association to administer benefits for association members.

For purposes of this subdivision, an association formed by a merger of two or more associations after January 1, 1992, and otherwise meeting the criteria of this subdivision shall be deemed to have been in active existence on January 1, 1992, if its predecessor organizations had been in active existence on January 1, 1992, and for at least five years prior to that date and otherwise met the criteria of this subdivision.

(s) “Members of a guaranteed association” means any individual or employer meeting the association’s membership criteria if that person is a member of the association and chooses to purchase health coverage through the association. At the association’s discretion, it may also include employees of association members, association staff, retired members, retired employees of members, and surviving spouses and dependents of deceased members. However, if an association chooses to include those persons as members of the guaranteed association, the association must so elect in advance of purchasing coverage from a plan. Health plans may require an association to adhere to the membership composition it selects for up to 12 months.

(t) “Grandfathered health plan” has the meaning set forth in Section 1251 of PPACA.

(u) “Nongrandfathered health benefit plan” means a health benefit plan that is not a grandfathered health plan.

(v) “Plan year” has the meaning set forth in Section 144.103 of Title 45 of the Code of Federal Regulations.

(w) “PPACA” means the federal Patient Protection and Affordable Care Act (Public Law 111-148), as amended by the federal Health Care and Education Reconciliation Act of 2010 (Public Law 111-152), and any rules, regulations, or guidance issued thereunder.

(x) “Waiting period” means a period that is required to pass with respect to the employee before the employee is eligible to be covered for benefits under the terms of the contract.

(y) “Registered domestic partner” means a person who has established a domestic partnership as described in Section 297 of the Family Code.

(z) “Family” means the policyholder and his or her dependents.

history: (History: Amended by Stats. 2018, Ch. 700, Sec. 8. (SB 1375) Effective January 1, 2019.)

article: 1. Definitions

path: 2. CLASSES OF INSURANCE > 2. LIFE AND DISABILITY INSURANCE > 8.01. Nongrandfathered Small Employer Health Insurance > 1. Definitions


text:
(a) For purposes of this chapter, “health benefit plan” does not include policies or certificates of specified disease or hospital confinement indemnity provided that the carrier offering those policies or certificates complies with the following:

(1) The carrier files, on or before March 1 of each year, a certification with the commissioner that contains the statement and information described in paragraph (2).

(2) The certification required in paragraph (1) shall contain the following:

(A) A statement from the carrier certifying that policies or certificates described in this section (i) are being offered and marketed as supplemental health insurance and not as a substitute for coverage that provides essential health benefits as defined by the state pursuant to Section 1302 of PPACA, and (ii) the disclosure forms as described in Section 10603 contains the following statement prominently on the first page: “This is a supplement to health insurance. It is not a substitute for essential health benefits or minimum essential coverage as defined in federal law.”

(B) A summary description of each policy or certificate described in this section, including the average annual premium rates, or range of premium rates in cases where premiums vary by age, gender, or other factors, charged for the policies and certificates issued or delivered in this state.

(3) In the case of a policy or certificate that is described in this section and that is offered for the first time in this state with respect to plan years on or after January 1, 2014, the carrier files with the commissioner the information and statement required in paragraph (2) at least 30 days prior to the date such a policy or certificate is issued or delivered in this state.

(b) As used in this section, “policies or certificates of specified disease” and “policies or certificates of hospital confinement indemnity” mean policies or certificates of insurance sold to an insured to supplement other health insurance coverage as specified in this section. An insurer issuing a “policy or certificate of specified disease” or a “policy or certificate of hospital confinement indemnity” shall require that the person to be insured is covered by an individual or group policy or contract that arranges or provides medical, hospital, and surgical coverage not designed to supplement other private or governmental plans.

history: (History: Added by Stats. 2012, Ch. 852, Sec. 14. (AB 1083) Effective January 1, 2013.)

chapter: 8.01. Nongrandfathered Small Employer Health Insurance

article: 1. Definitions


text:
(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.

article: 2. Small Employer Carrier Requirements

path: 2. CLASSES OF INSURANCE > 2. LIFE AND DISABILITY INSURANCE > 8.01. Nongrandfathered Small Employer Health Insurance > 2. Small Employer Carrier Requirements


text: 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.

article: 2. Small Employer Carrier Requirements


text: 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.

article: 2. Small Employer Carrier Requirements


text: The commissioner may issue regulations that are necessary to carry out the purposes of this chapter.

article: 2. Small Employer Carrier Requirements