text:
(a) (1) For a small employer health insurance policy offered, sold, or renewed on or after January 1, 2014, the deductible under the policy shall not exceed:

(A) Two thousand dollars ($2,000) in the case of a policy covering a single individual.

(B) Four thousand dollars ($4,000) in the case of any other policy.

(2) The dollar amounts in this section shall be indexed consistent with Section 1302(c)(4) of PPACA and any federal rules or guidance pursuant to that section.

(3) The limitation in this subdivision shall be applied in a manner that does not affect the actuarial value of any small employer health insurance policy.

(4) For small group products at the bronze level of coverage, as defined in Section 10112.295, the department may permit insurers to offer a higher deductible in order to meet the actuarial value requirement of the bronze level. In making this determination, the department shall consider affordability of cost sharing for insureds and shall also consider whether insureds may be deterred from seeking appropriate care because of higher cost sharing.

(b) Nothing in this section shall be construed to allow a policy to have a deductible that applies to preventive services as defined in PPACA.

(c) This section shall not apply to 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 and that comply with small group health reforms unless otherwise required by federal law or guidance.

(d) “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.

history: (History: Amended by Stats. 2015, Ch. 641, Sec. 4. (AB 1305) Effective January 1, 2016.)

article: 1. General Provisions


kind: section

code: INS

text:
(a) An insurer providing individual coverage in the Exchange shall cooperate with requests from the Exchange to collaborate in the development of, and participate in the implementation of, the Medi-Cal program’s premium and cost-sharing payments under Sections 14102 and 14148.65 of the Welfare and Institutions Code for eligible Exchange insureds.

(b) An insurer providing individual coverage in the Exchange shall not charge, bill, ask, or require an insured receiving benefits under Section 14102 or 14148.65 of the Welfare and Institutions Code to make any premium or cost-sharing payments for any services that are subject to premium or cost-sharing payments by the State Department of Health Care Services under Section 14102 or 14148.65 of the Welfare and Institutions Code.

(c) For purposes of this section, “Exchange” means the California Health Benefit Exchange established pursuant to Title 22 (commencing with Section 100500) of the Government Code.

history: (History: Amended by Stats. 2015, Ch. 303, Sec. 368. (AB 731) Effective January 1, 2016.)

division: 2. CLASSES OF INSURANCE

part: 2. LIFE AND DISABILITY INSURANCE

chapter: 1. The Contract

article: 1. General Provisions

path: 2. CLASSES OF INSURANCE > 2. LIFE AND DISABILITY INSURANCE > 1. The Contract > 1. General Provisions


text:
(a) If a health insurer sends payment for services provided directly to the insured and not to the provider, the insurer shall send notice to the insured and the provider who provided the services that the insurer has sent payment to the insured.

(b) The notice sent to the insured pursuant to subdivision (a) shall include all of the following:

(1) The date the notice was sent and the name and address of the provider who billed for the service.

(2) A statement that if the insured has paid the full bill for the service, including both their cost-sharing and the insurer share of cost obligation, the actions described to collect the insurer obligated payment in paragraph (3) do not apply, and that this check is for reimbursement of the consumer for paying the insurer share of cost obligation.

(3) Information about action that may be taken if the insured does not send the insurer’s obligated payment to the provider, including all of the following:

(A) That an unpaid bill may be sent to collections and the insured may be subject to collections.

(B) That the provider or debt collector may pursue litigation against the insured to collect the bill.

(C) That the unpaid insurer share of cost obligation may be reported to a credit reporting agency as medical debt if the provider does not receive the payment within 60 days of the notice, or within one year after initial billing for the service, whichever is later.

(c) The required notice sent to the provider pursuant to subdivision (a) shall include the date that the notice to the insured was sent and the amount sent to the insured to reimburse the provider.

(d) If the provider does not receive the payment from the insured within 60 days of the notice to the insured, or within one year after initial billing for the service, whichever is later, the insurer’s share of cost in possession of the insured that has not been paid to the provider may be reported to a credit reporting agency as medical debt and shall not be considered medical debt for purposes of Sections 1785.13, 1785.20.6, 1785.27, and 1786.18 of the Civil Code if both of the following are true:

(1) The entity reporting the information has adequate documentation to substantiate that the insured actually received the funds from the insurer.

(2) The insured has not raised a dispute with the insurer, provider, or department as to whether the amount was received.

(e) This section does not limit existing requirements under this chapter protecting insureds from balance billing, including Sections 10112.8 and 10126.66.

(f) This section does not apply if the direct payment for services provided to the insured is a reimbursement from the insurer because the insured paid the insurer’s share of cost obligation.

history: (History: Added by Stats. 2024, Ch. 520, Sec. 11. (SB 1061) Effective January 1, 2025.)

article: 1. General Provisions


text:
(a) (1) By September 1, 2017, the commissioner shall establish an independent dispute resolution process for the purpose of processing and resolving a claim dispute between a health insurer and a noncontracting individual health professional for services subject to subdivision (a) of Section 10112.8.

(2) Prior to initiating the independent dispute resolution process, the parties shall complete the insurer’s internal process.

(3) If either the noncontracting individual health professional or the insurer appeals a claim to the department’s independent dispute resolution process, the other party shall participate in the appeal process as described in this section.

(b) (1) The commissioner shall establish uniform written procedures for the submission, receipt, processing, and resolution of claim payment disputes pursuant to this section and any other guidelines for implementing this section. These procedures shall include a process for each party to submit into evidence information that will be kept confidential from the other party, in order to preserve the confidentiality of the source contract.

(2) The commissioner shall establish reasonable and necessary fees for the purpose of administering this section, to be paid by both parties.

(3) In establishing the independent dispute resolution process, the commissioner shall permit the bundling of claims submitted to the same insurer or the same delegated entity for the same or similar services by the same noncontracting individual health professional.

(4) The commissioner shall permit a physician group, independent practice association, or other entity authorized to act on behalf of a noncontracting individual health professional to initiate and participate in the independent dispute resolution process.

(5) (A) In deciding the dispute, the independent organization shall conduct a de novo review and base its decision regarding the appropriate reimbursement on the information and documents timely submitted into evidence by the parties to the dispute.

(B) The independent organization shall assign reviewers to each case based on their relevant education, background, and medical claims payment and clinical experience.

(c) (1) The commissioner may contract with one or more independent organizations to conduct the proceedings. The independent organization handling a dispute shall be independent of either party to the dispute.

(2) The commissioner shall establish conflict-of-interest standards, consistent with the purposes of this section, that an organization shall meet in order to qualify to administer the independent dispute resolution program. The conflict-of-interest standards shall be consistent with the standards pursuant to subdivisions (c) and (d) of Section 10169.2.

(3) The commissioner may contract with the same independent organization or organizations as the State Department of Managed Health Care.

(4) The commissioner shall provide, upon the request of an interested person, a copy of all nonproprietary information, as determined by the commissioner, filed with the department by an independent organization seeking to contract with the department to administer the independent dispute resolution process pursuant to this section. The department may charge a nominal fee to cover the costs of providing a copy of the information pursuant to this paragraph.

(5) Contracts entered into pursuant to the authority in this subdivision shall be exempt from Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, Section 19130 of the Government Code, and Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of the Government Code and shall be exempt from the review or approval of any division of the Department of General Services.

(d) The decision obtained through the commissioner’s independent dispute resolution process shall be binding on both parties. The insurer shall implement the decision obtained through the independent dispute resolution process. If dissatisfied, either party may pursue any right, remedy, or penalty established under any other applicable law.

(e) If a health insurer delegates payment functions to a contracted entity, including, but not limited to, a medical group or independent practice association, then the delegated entity shall comply with this section.

(f) This section shall not apply to emergency services and care, as defined in Section 1317.1 of the Health and Safety Code.

(g) The definitions in subdivision (f) of Section 10112.8 shall apply for purposes of this section.

(h) This section shall not be construed to alter a health insurer’s obligations pursuant to Section 10123.13.

(i) Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the commissioner may implement, interpret, or make specific this section by issuing guidance, without taking regulatory action, until the time regulations are adopted.

(j) By January 1, 2019, the commissioner shall provide a report to the Governor, the President pro Tempore of the Senate, the Speaker of the Assembly, and the Senate and Assembly Committees on Health of the data and information provided in the independent dispute resolution process in a manner and format specified by the Legislature.

history: (History: Amended by Stats. 2020, Ch. 278, Sec. 2. (AB 2157) Effective January 1, 2021.)

article: 1. General Provisions


text:
(a) (1) For services rendered subject to Section 10112.8, effective July 1, 2017, unless otherwise agreed to by the noncontracting individual health professional and the insurer, the insurer shall reimburse the greater of the average contracted rate or 125 percent of the amount Medicare reimburses on a fee-for-service basis for the same or similar services in the general geographic region in which the services were rendered. For the purposes of this section, “average contracted rate” means the average of the contracted commercial rates paid by the health insurer for the same or similar services in the geographic region. This subdivision does not apply to subdivision (c) of Section 10112.8 or subdivision (b) of this section.

(2) (A) By July 1, 2017, each health insurer shall provide to the commissioner all of the following:

(i) Data listing its average contracted rates for the insurer for services most frequently subject to Section 10112.8 in each geographic region in which the services are rendered for the calendar year 2015.

(ii) Its methodology for determining the average contracted rate for the insurer for services subject to Section 10112.8. The methodology to determine an average contracted rate shall ensure that the insurer includes the highest and lowest contracted rates for the calendar year 2015.

(iii) The policies and procedures used to determine the average contracted rates under this subdivision.

(B) For each calendar year after the health insurer’s initial submission of the average contracted rate as specified in subparagraph (A) and until the standardized methodology under paragraph (3) is specified, a health insurer shall adjust the rate initially established pursuant to this subdivision by the Consumer Price Index for Medical Care Services, as published by the United States Bureau of Labor Statistics.

(3) (A) By January 1, 2019, the commissioner shall specify a methodology that insurers shall use to determine the average contracted rates for services most frequently subject to Section 10112.8. This methodology shall take into account, at a minimum, information from the independent dispute resolution process, the specialty of the individual health professional, and the geographic region in which the services are rendered. The methodology to determine an average contracted rate shall ensure that the insurer includes the highest and lowest contracted rates.

(B) Insurers shall provide to the commissioner the policies and procedures used to determine the average contracted rates in compliance with subparagraph (A).

(C) The average contracted rate data submitted pursuant to this section shall be confidential and not subject to disclosure under the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).

(D) In developing the standardized methodology under this subdivision, the commissioner shall consult with interested parties throughout the process of developing the standards, including the Department of Managed Health Care, representatives of health plans, insurers, health care providers, hospitals, consumer advocates, and other stakeholders it deems appropriate. The commissioner shall hold the first stakeholder meeting no later than July 1, 2017.

(4) A health insurer shall include in its reports submitted to the commissioner pursuant to Section 10133.5 and regulations adopted pursuant to that section, in a manner specified by the department, the number of payments made to noncontracting individual health professionals for services at a contracting health facility and subject to Section 10112.8, as well as other data sufficient to determine the proportion of noncontracting individual health professionals to contracting individual health professionals at contracting health facilities, as defined in subdivision (f) of Section 10112.8. The commissioner shall include a summary of this information in its January 1, 2019, report required pursuant to subdivision (j) of Section 10112.81 and its findings regarding the impact of the act that added this section on health insurer contracting and network adequacy.

(5) A health insurer that provides services subject to Section 10112.8 shall meet the network adequacy requirements set forth in this chapter, including, but not limited to, Section 10133.5 of this code and Sections 2240.1 and 2240.7 of Title 10 of the California Code of Regulations, including, but not limited to, inpatient hospital services and specialist physician services, and if necessary, the commissioner may adopt additional regulations related to those services. This section shall not be construed to limit the commissioner’s authority under this chapter.

(6) For the purposes of this section, for average contracted rates for individual and small group coverage, geographic region shall be the geographic regions listed in subparagraph (A) of paragraph (2) of subdivision (a) of Section 10753.14. For purposes of this section for Medicare fee-for-service reimbursement, geographic regions shall be the geographic regions specified for physician reimbursement for Medicare fee-for-service by the United States Department of Health and Human Services.

(7) A health insurer shall authorize and permit assignment of the insured’s right, if any, to any reimbursement for health care services covered under the health insurance policy to a noncontracting individual health professional who furnishes the health care services rendered subject to Section 10112.8. Lack of assignment pursuant to this paragraph shall not be construed to limit the applicability of this section, Section 10112.8, or Section 10112.81.

(8) A noncontracting individual health professional or health insurer who disputes the claim reimbursement under this section shall utilize the independent dispute resolution process described in Section 10112.81.

(b) If nonemergency services are provided by a noncontracting individual health professional consistent with subdivision (c) of Section 10112.8 to an insured who has voluntarily chosen to use the insured’s out-of-network benefit for services covered by an insurer that includes coverage for out-of-network benefits, unless otherwise agreed to by the insurer and the noncontracting individual health professional, the amount paid by the insurer shall be the amount set forth in the insured’s policy. This payment is not subject to the independent dispute resolution process described in Section 10112.81.

(c) If a health insurer delegates the responsibility for payment of claims to a contracted entity, including, but not limited to, a medical group or independent practice association, then the entity to which that responsibility is delegated shall comply with the requirements of this section.

(d) (1) A payment made by the health insurer to the noncontracting health care professional for nonemergency services as required by Section 10112.8 and this section, in addition to the applicable cost sharing owed by the insured, shall constitute payment in full for nonemergency services rendered unless either party uses the dispute resolution process or other lawful means pursuant to Section 10112.81.

(2) Notwithstanding any other law, the amounts paid by an insurer for services under this section shall not constitute the prevailing or customary charges, the usual fees to the general public, or other charges for other payers for an individual health professional.

(3) This subdivision shall not preclude the use of the independent dispute resolution process pursuant to Section 10112.81.

(e) This section shall not apply to emergency services and care, as defined in Section 1317.1 of the Health and Safety Code.

(f) The definitions in subdivision (f) of Section 10112.8 shall apply for purposes of this section.

(g) This section shall not be construed to alter a health insurer’s obligations pursuant to Section 10123.13.

history: (History: Amended by Stats. 2021, Ch. 615, Sec. 308. (AB 474) Effective January 1, 2022. Operative January 1, 2023, pursuant to Sec. 463 of Stats. 2021, Ch. 615.)

article: 1. General Provisions


text:
(a) A health insurer shall provide an insured who has been displaced or whose health otherwise may be affected by a state of emergency, as declared by the Governor pursuant to Section 8625 of the Government Code, or a health emergency, as declared by the State Public Health Officer pursuant to Section 101080 of the Health and Safety Code, access to medically necessary health care services.

(b) Within 48 hours of a declaration by the Governor of a state of emergency or a declaration by the State Public Health Officer of a health emergency that displaces, or has the immediate potential to displace, insureds or health care providers, or that otherwise affects, or may affect, health care providers or the health of insureds, a health insurer operating in the county or counties included in the declaration shall file with the department a notification describing whether the insurer has experienced or expects to experience any disruption to the operation of the insurer, explaining how the insurer is communicating with potentially impacted insureds, and summarizing the actions the insurer has taken or is in the process of taking to ensure that the health care needs of insureds are met. The department may require the insurer to take actions, including, but not limited to, the following:

(1) Shorten time limits for health insurers to approve prior authorization, precertification, or referrals, and extend the time that prior authorizations, precertifications, and referrals remain valid.

(2) Extend filing deadlines for claims.

(3) Suspend prescription refill limitations and allow an impacted insured to refill their prescriptions at an out-of-network pharmacy.

(4) Authorize an insured to replace medical equipment or supplies.

(5) Allow an insured to access an appropriate out-of-network provider if an in-network provider is unavailable due to the state of emergency or if the insured is out of the area due to displacement.

(6) Have a toll-free telephone number that an affected insured may call for answers to questions, including questions about the loss of health insurance identification cards, access to prescription refills, or how to access health care.

(c) This section shall not be construed to limit the Governor’s authority under the California Emergency Services Act (Chapter 7 (commencing with Section 8550) of Division 1 of Title 2 of the Government Code), or the commissioner’s authority under any provision of this part.

(d) The commissioner may issue guidance to insurers regarding compliance with this section during the first three years following the declaration of emergency, or until the emergency is terminated, whichever occurs first. This guidance shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).

history: (History: Amended by Stats. 2022, Ch. 421, Sec. 2. (SB 979) Effective January 1, 2023.)

article: 1. General Provisions


text:
(a) A large group health insurance policy issued, amended, or renewed on or after July 1, 2022, shall cover medically necessary basic health care services.

(b) “Basic health care services” means all the following:

(1) Physician services, including consultation and referral.

(2) Hospital inpatient services and ambulatory care services.

(3) Diagnostic laboratory and diagnostic and therapeutic radiologic services.

(4) Home health services.

(5) Preventive health services.

(6) Emergency health care services, including ambulance and ambulance transport services and out-of-area coverage. “Basic health care services” includes ambulance and ambulance transport services provided through the “911” emergency response system.

(7) Hospice care that is, at a minimum, equivalent to hospice care provided by the federal Medicare Program pursuant to Title XVIII of the Social Security Act (42 U.S.C. Sec. 1395 et seq.) and implementing regulations adopted for hospice care under Title XVIII of the Social Security Act in Part 418 of Chapter IV of Title 42 of the Code of Federal Regulations, except Subparts A, B, G, and H, and any amendments or successor provisions.

(c) “Out-of-area coverage” means coverage while an insured is anywhere outside the service area of the applicable network, and shall also include coverage for urgently needed services to prevent serious deterioration of an insured’s health resulting from unforeseen illness or injury for which treatment cannot be delayed until the insured returns to the service area.

(d) This section does not prohibit a large group health insurance policy from covering additional benefits.

(e) The commissioner may adopt regulations pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) to implement this section. Prior to adopting regulations, the commissioner shall consult with the Department of Managed Health Care to ensure consistency, to the extent practical, with Section 1300.67 of Title 28 of the California Code of Regulations.

(f) (1) If Section 10112.27 is no longer in effect, this section and any regulations implementing this section shall apply to an individual, group, or blanket disability insurance policy that covers hospital, medical, or surgical benefits, except as provided in subdivision (g).

(2) If the condition described in paragraph (1) occurs, the department shall post notice on its internet website that this section applies to an individual, group, or blanket disability insurance policy that covers hospital, medical, or surgical benefits, and shall provide written notice to the Secretary of the Senate, the Chief Clerk of the Assembly, and the Legislative Counsel.

(g) This section does not apply to a specialized health insurance policy that covers only dental or vision benefits.

history: (History: Added by Stats. 2021, Ch. 636, Sec. 1. (SB 280) Effective January 1, 2022.)

article: 1. General Provisions


text:
(a) With respect to large group health insurance, an insurer and its officials, employees, agents, and representatives shall not, directly or indirectly, employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminating based on an individual’s race, color, national origin, present or predicted disability, age, sex, gender identity, sexual orientation, expected length of life, degree of medical dependency, quality of life, or other health conditions.

(b) An insurer that violates this section shall be liable for an administrative penalty 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.

(c) An insurer that violates this section with a frequency that indicates a general business practice or commits a knowing violation of this section shall be liable for an administrative penalty of not less than fifteen thousand dollars ($15,000), and not more than one hundred thousand dollars ($100,000) for each violation.

(d) This section does not apply to a grandfathered large group health insurance policy or a specialized health insurance policy that covers only dental or vision benefits.

history: (History: Added by Stats. 2021, Ch. 636, Sec. 2. (SB 280) Effective January 1, 2022.)

article: 1. General Provisions


text:
(a) For a health insurance policy issued, amended, or renewed on or after July 1, 2022, in the individual or group market, a health insurer shall monitor an insured’s accrual toward their annual deductible, if any, for covered benefits, as set forth in this section and any regulations promulgated by the department.

(1) A health insurer shall provide an insured with their accrual balance toward their annual deductible for every month in which benefits were used and until the accrual balance equals the full deductible amount.

(2) A health insurer subject to this section shall establish and maintain a system that allows an insured to request their most up-to-date accrual balance toward their annual deductible from their health insurer at any time.

(3) If the health insurance policy includes more than one annual deductible for an insured, then this section applies to each deductible.

(b) For a health insurance policy issued, amended, or renewed on or after July 1, 2022, in the individual or group market, an insurer shall monitor an insured’s accrual balance toward their annual out-of-pocket maximum, if any, for covered benefits, as set forth in this section and any regulations promulgated by the department.

(1) A health insurer shall provide an insured with their accrual balance toward their annual out-of-pocket maximum for every month in which benefits were used and until the accrual balance equals the full out-of-pocket maximum.

(2) A health insurer subject to this section shall establish and maintain a system that allows an insured to request their most up-to-date accrual balance toward their annual out-of-pocket maximum from their health insurer at any time.

(c) Accrual updates shall be mailed to an insured unless the insured has elected to opt out of mailed notice and elected to receive the accrual update electronically as allowed according to Section 38.6, or unless the insured has previously opted out of mailed notices.

(1) Insureds who have opted out of receiving mailed notice may opt back in at any time.

(2) Accrual updates may be included with evidence of benefit statements.

(d) A health insurer shall notify insureds of their rights pursuant to this section, including, but not limited to, how to request information and how to opt out of mailed notices and elect to instead receive their accrual update electronically, in the manner set forth by the department. The department may issue guidance regarding implementation of, and compliance with, this subdivision. This guidance shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 1340) of Part 1 of Division 3 of Title 2 of the Government Code), until January 1, 2027. The department shall consult with stakeholders in developing guidance pursuant to this subdivision.

(e) If a health insurer delegates claims payment functions to a contracted entity, including, but not limited to, a medical group or independent practice association, the delegated entity shall comply with the requirements of this section. A health insurer shall specify by contract the delegated entity’s responsibilities and shall monitor the delegated entity to ensure compliance with this section. Notwithstanding delegation pursuant to this subdivision, the health insurer shall remain responsible for compliance with this section.

history: (History: Added by Stats. 2021, Ch. 602, Sec. 2. (SB 368) Effective January 1, 2022.)

article: 1. General Provisions


text:
(a) Levels of coverage for the nongrandfathered individual market are defined as follows:

(1) Bronze level: A health insurance policy in the bronze level shall provide a level of coverage that is actuarially equivalent to 60 percent of the full actuarial value of the benefits provided under the policy.

(2) Silver level: A health insurance policy in the silver level shall provide a level of coverage that is actuarially equivalent to 70 percent of the full actuarial value of the benefits provided under the policy.

(3) Gold level: A health insurance policy in the gold level shall provide a level of coverage that is actuarially equivalent to 80 percent of the full actuarial value of the benefits provided under the policy.

(4) Platinum level: A health insurance policy in the platinum level shall provide a level of coverage that is actuarially equivalent to 90 percent of the full actuarial value of the benefits provided under the policy.

(b) Actuarial value for nongrandfathered individual health insurance policies shall be determined in accordance with the following:

(1) Actuarial value shall not vary by more than plus or minus 2 percent.

(2) Actuarial value shall be determined on the basis of essential health benefits as defined in Section 10112.27 and as provided to a standard, nonelderly population. For this purpose, a standard population shall not include those receiving coverage through the Medi-Cal or Medicare programs.

(3) The department may use the actuarial value methodology developed consistent with Section 1302(d) of PPACA.

(4) The actuarial value for pediatric dental benefits, whether offered by a major medical policy or a specialized health insurance policy, shall be consistent with federal law and guidance applicable to the policy type.

(5) The department, in consultation with the Department of Managed Health Care and the Exchange, shall consider whether to exercise state-level flexibility with respect to the actuarial value calculator in order to take into account the unique characteristics of the California health care coverage market, including the prevalence of health insurance policies, total cost of care paid for by the health insurer, price of care, patterns of service utilization, and relevant demographic factors.

(c) (1) A catastrophic policy is a health insurance policy that provides no benefits for any plan year until the insured has incurred cost-sharing expenses in an amount equal to the annual limit on out-of-pocket costs as specified in Section 10112.28 except that it shall provide coverage for at least three primary care visits. A carrier that is not participating in the Exchange shall not offer, market, or sell a catastrophic plan in the individual market.

(2) A catastrophic policy may be offered only in the individual market and only if consistent with this paragraph. Catastrophic policies may be offered only if either of the following apply:

(A) The individual purchasing the policy has not yet attained 30 years of age before the beginning of the plan year.

(B) The individual has a certificate of exemption from Section 5000(A) of the Internal Revenue Code because the individual is not offered affordable coverage or because the individual faces hardship.

(d) This section shall apply to a policy of health insurance, as defined in subdivision (b) of Section 106, that covers any essential health benefit as defined in Section 10112.27. This section shall not apply to a specialized health insurance policy that does not cover any of the essential health benefits.

(e) “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.

history: (History: Added by Stats. 2013, Ch. 316, Sec. 12. (SB 639) Effective January 1, 2014.)

article: 1. General Provisions


text: Notwithstanding paragraph (1) of subdivision (b) of Section 10112.295 and paragraph (1) of subdivision (b) of Section 10112.297, the actuarial value for a nongrandfathered bronze level health insurance policy that either covers and pays for at least one major service, other than preventive services, before the deductible or meets the requirements to be a high deductible health plan, as defined in Section 223(c)(2) of Title 26 of the United States Code, may range from plus 5 percent to minus 2 percent.

history: (History: Amended by Stats. 2020, Ch. 12, Sec. 36. (AB 80) Effective June 29, 2020.)

article: 1. General Provisions


text:
(a) Levels of coverage for the nongrandfathered small group market are defined as follows:

(1) Bronze level: A health insurance policy in the bronze level shall provide a level of coverage that is actuarially equivalent to 60 percent of the full actuarial value of the benefits provided under the policy.

(2) Silver level: A health insurance policy in the silver level shall provide a level of coverage that is actuarially equivalent to 70 percent of the full actuarial value of the benefits provided under the policy.

(3) Gold level: A health insurance policy in the gold level shall provide a level of coverage that is actuarially equivalent to 80 percent of the full actuarial value of the benefits provided under the policy.

(4) Platinum level: A health insurance policy in the platinum level shall provide a level of coverage that is actuarially equivalent to 90 percent of the full actuarial value of the benefits provided under the policy.

(b) Actuarial value for nongrandfathered small employer health insurance policies shall be determined in accordance with the following:

(1) Actuarial value shall not vary by more than plus or minus 2 percent.

(2) Actuarial value shall be determined on the basis of essential health benefits as defined in paragraph (1) of subdivision (a) of Section 10112.27 and as provided to a standard, nonelderly population. For this purpose, a standard population shall not include those receiving coverage through the Medi-Cal or Medicare programs.

(3) The department may use the actuarial value methodology developed consistent with Section 1302(d) of PPACA.

(4) The actuarial value for pediatric dental benefits, whether offered by a major medical policy or a specialized health insurance policy, shall be consistent with federal law and guidance applicable to the policy type.

(5) The department, in consultation with the Department of Managed Health Care and the Exchange, shall consider whether to exercise state-level flexibility with respect to the actuarial value calculator in order to take into account the unique characteristics of the California health care coverage market, including the prevalence of health insurance policies, total cost of care paid for by the health insurer, price of care, patterns of service utilization, and relevant demographic factors.

(6) Employer contributions toward health reimbursement accounts and health savings accounts shall count toward the actuarial value of the product in the manner specified in federal rules and guidance.

(c) “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.

history: (History: Added by Stats. 2013, Ch. 316, Sec. 13. (SB 639) Effective January 1, 2014.)

article: 1. General Provisions


text:
(a) (1) A small employer health benefit plan in effect on December 31, 2013, and still in effect as of the effective date of this section, that does not qualify as a grandfathered health plan under Section 1251 of PPACA may be renewed until January 1, 2015, and may continue to be in force until December 31, 2015, subject to applicable federal law, and any other requirements imposed by this part.

(2) A small employer health benefit plan described in paragraph (1) may continue to be in force after December 31, 2015, if the plan is amended to comply with all of the provisions listed in subdivision (e) by January 1, 2016, and complies with all other applicable provisions of law.

(b) (1) If an insurer offers for renewal a small employer health benefit plan pursuant to paragraph (1) of subdivision (a), the insurer shall provide notice to the group contractholder regarding the option to renew coverage pursuant to subdivision (a) using the relevant notice attached to the guidance entitled “Insurance Standards Bulletin Series – Extension of Transition Policy through October 1, 2016,” issued by the United States Department of Health and Human Services, Centers for Medicare and Medicaid Services on March 5, 2014.

(2) An insurer shall include the following notice with the notice issued pursuant to paragraph (1): “New health care coverage options are available in California. You currently have health care coverage that is not required to comply with many new laws. A new health benefit plan may be more affordable and/or offer more comprehensive benefits. New plans may also have limits on deductibles and out-of-pocket costs, while your existing plan may have no such limits.

You have the option to remain with your current coverage for one more year or switch to new coverage that complies with the new laws. Covered California, the state’s new health insurance marketplace, offers small employers health insurance from a number of companies through its Small Business Health Options Program (SHOP). Federal tax credits are available through the SHOP to those small employers that qualify. Talk to Covered California (1-877-453-9198), your plan representative, or your insurance agent to discuss your options.” (3) An insurer shall include with the notices issued pursuant to paragraphs (1) and (2), the premium, cost sharing, and benefits associated with the plan’s standard benefit designs approved consistent with subdivision (c) of Section 100504 of the Government Code for the geographic region of the small employer.

(4) An insurer that offers for renewal a small employer health benefit plan pursuant to paragraph (1) of subdivision (a) shall offer renewal to all employers whose health benefit plan with that insurer was in effect on December 31, 2013.

(c) (1) A small employer health benefit plan in effect on December 31, 2013, and still in effect as of the effective date of this section, that does not qualify as a grandfathered health plan under Section 1251 of PPACA that is renewed on or before January 1, 2015, and that continues to be in force until no later than December 31, 2015, is exempt from the following provisions:

(A) Paragraph (1) of subdivision (b) of, and subdivisions (c), (g), and (k) of, Section 10753.05.

(B) Section 10753.14.

(C) Section 10112.27.

(D) Section 10112.285.

(E) Section 10112.28.

(F) Section 10112.29.

(G) Section 10112.297.

(2) Notwithstanding paragraph (1) of subdivision (b) of, and subdivision (g) of, Section 10753.05, a small employer health benefit plan subject to this section shall only be offered, marketed, and sold to an employer whose health benefit plan with that insurer was in effect on December 31, 2013.

(d) A small employer health benefit plan described in paragraph (1) of subdivision (a) shall be subject to Sections 10714 and 10715, and shall continue to be subject to Chapter 8.01 (commencing with Section 10753), except as provided in subdivision (c), and to all otherwise applicable provisions of this part.

(e) No later than January 1, 2016, a small employer health benefit plan described in paragraph (1) of subdivision (a) may be amended to comply with all of the following:

(1) Paragraph (1) of subdivision (b) of, and subdivisions (c), (g), and (k) of, Section 10753.05.

(2) Section 10753.14.

(3) Section 10112.27.

(4) Section 10112.28.

(5) Section 10112.29.

(6) Section 10112.297.

(f) This section shall be implemented only to the extent permitted by PPACA.

(g) For purposes of this section, the following definitions shall apply:

(1) “Health benefit plan” has the same meaning as defined in subdivision (j) of Section 10753.

(2) “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 pursuant to that law.

(3) “Small employer health benefit plan” means a group health benefit plan issued to a small employer, as defined in Section 10753.

history: (History: Added by Stats. 2014, Ch. 84, Sec. 2. (SB 1446) Effective July 7, 2014.)

article: 1. General Provisions


text: Every policy of life, disability, or life and disability insurance issued or delivered within this State on or after the first day of January, 1936, by any insurer doing such business within this State shall contain and be deemed to constitute the entire contract between the parties and nothing shall be incorporated therein by reference to any constitution, by-laws, rules, application or other writings, of either of the parties thereto or of any other person, unless the same are indorsed upon or attached to the policy; and all statements purporting to be made by the insured shall, in the absence of fraud, be representations and not warranties. Any waiver of the provisions of this section shall be void.

history: (History: Added by Stats. 1935, Ch. 245.)

article: 1. General Provisions


text:
The following provisions shall apply to this act:

(a) “Advertisement” means any written, electronic, or printed communication or any communication by means of recorded telephone messages or transmitted on radio, television, the Internet, or similar communications media, including film strips, motion pictures, and videos, published, disseminated, circulated, or placed before the public, directly or indirectly, for the purpose of creating an interest in or inducing a person to purchase or sell, assign, devise, bequest, or transfer the death benefit or ownership of a life insurance policy or an interest in a life insurance policy pursuant to a life settlement contract.

(b) “Broker” means a person who, on behalf of an owner, and for a fee, commission, or other valuable consideration, offers or attempts to negotiate life settlement contracts between an owner and providers. A broker represents only the owner and owes a fiduciary duty to the owner to act according to the owner’s instructions, and in the best interest of the owner, notwithstanding the manner in which the broker is compensated. A broker does not include an attorney, certified public accountant, or financial planner retained in the type of practice customarily performed in his or her professional capacity to represent the owner whose compensation is not paid directly or indirectly by the provider or any other person, except the owner.

(c) “Business of life settlements” means an activity involved in, but not limited to, offering to enter into, soliciting, negotiating, procuring, effectuating, monitoring, or tracking of life settlement contracts.

(d) “Commissioner” means the Insurance Commissioner.

(e) “Financing entity” means an underwriter, placement agent, lender, purchaser of securities, purchaser of a policy or certificate from a provider, credit enhancer, or any entity that has a direct ownership in a policy or certificate that is the subject of a life settlement contract, as to which both of the following apply:

(1) It is an entity whose principal activity related to the transaction is providing funds to effect the life settlement contract or purchase of one or more policies.

(2) It is an entity that has an agreement in writing with one or more providers to finance the acquisition of life settlement contracts.

(f) “Financing transaction” means a transaction in which a licensed provider obtains financing from a financing entity, including, without limitation, any secured or unsecured financing, any securitization transaction, or any securities offering which either is registered or exempt from registration under federal and state securities law.

(g) “Fraudulent life settlement act” includes all of the following:

(1) Acts or omissions committed by any person that, for the purpose of depriving another of property or for pecuniary gain, commits or permits its employees or its agents to engage in acts, including, but not limited to, the following:

(A) Presenting, causing to be presented, or preparing with knowledge and belief that it will be presented to or by a provider, premium finance lender, broker, insurer, insurance producer, or any other person, false material information, or concealing material information, as part of, in support of, or concerning a fact material to one or more of the following:

(i) An application for the issuance of a life settlement contract or insurance policy.

(ii) The underwriting of a life settlement contract or insurance policy.

(iii) A claim for payment or benefit pursuant to a life settlement contract or insurance policy.

(iv) Premiums paid on an insurance policy.

(v) Payments and changes in ownership or beneficiary made in accordance with the terms of a life settlement contract or insurance policy.

(vi) The reinstatement or conversion of an insurance policy.

(vii) The solicitation, offer to enter into, or effectuation of, a life settlement contract or insurance policy.

(viii) The issuance of written evidence of life settlement contracts or insurance.

(ix) Any application for, or the existence of or any payments related to, a loan secured directly or indirectly by any interest in a life insurance policy.

(B) Entering into stranger-originated life insurance (STOLI).

(C) Employing any device, scheme, or artifice to defraud in the business of life settlements.

(2) Any of the following that any person does, or permits his or her employees or agents to do, in the furtherance of a fraud, or to prevent the detection of a fraud:

(A) Remove, conceal, alter, destroy, or sequester from the commissioner the assets or records of a licensee or other person engaged in the business of life settlements.

(B) Misrepresent or conceal the financial condition of a licensee, financing entity, insurer, or other person.

(C) Transact the business of life settlements in violation of laws requiring a license, certificate of authority, or other legal authority for the transaction of the business of life settlements.

(D) File with the commissioner or the chief insurance regulatory official of another jurisdiction a document containing false information or otherwise concealing information about a material fact from the commissioner.

(E) Engage in embezzlement, theft, misappropriation, or conversion of moneys, funds, premiums, credits, or other property of a provider, insurer, insured, owner, insurance policyowner, or any other person engaged in the business of life settlements or insurance.

(F) Enter into, broker, or otherwise deal in a life settlement contract, the subject of which is a life insurance policy that was obtained by presenting false information concerning any fact material to the policy or by concealing, for the purpose of misleading another, information requested concerning any fact material to the policy, where the owner or the owner’s agent intended to defraud the policy’s issuer.

(G) Attempt to commit, assist, aid, or abet in the commission of, or conspiracy to commit the acts or omissions specified in this subdivision.

(H) Misrepresent the state of residence of an owner to be a state or jurisdiction that does not have a law substantially similar to this act for the purpose of evading or avoiding the provisions of this act.

(h) “Insured” means the person covered under the policy being considered for sale in a life settlement contract.

(i) “Life expectancy” means the arithmetic mean of the number of months the insured under the life insurance policy to be settled can be expected to live considering medical records and appropriate experiential data.

(j) “Life insurance producer” means any person licensed in this state as a resident or nonresident insurance agent who has received qualification or authority for life insurance coverage or a life line of coverage pursuant to Chapter 5 (commencing with Section 1621) of Part 2 of Division 1.

(k) “Life settlement contract” means a written agreement solicited, negotiated, or entered into in this state between a provider and an owner, establishing the terms under which compensation or any thing of value will be paid, which compensation or thing of value is less than the expected death benefit of the insurance policy or certificate, in return for the owner’s assignment, transfer, sale, devise, or bequest of the death benefit or any portion of an insurance policy or certificate of insurance for compensation, provided, however, that the minimum value for a life settlement contract shall be greater than a cash surrender value or accelerated death benefit available at the time of an application for a life settlement contract. “Life settlement contract” also includes the transfer for compensation or value of ownership or beneficial interest in a trust or other entity that owns such policy if the trust or other entity was formed or availed of for the principal purpose of acquiring one or more life insurance contracts, which life insurance contract is owned by a person residing in this state.

(1) A “life settlement contract” includes a premium finance loan made for a policy on or before the date of issuance of the policy where one or more of the following conditions apply:

(A) The loan proceeds are not used solely to pay premiums for the policy and any costs or expenses incurred by the lender or the borrower in connection with the financing.

(B) The owner receives on the date of the premium finance loan a guarantee of the future life settlement value of the policy.

(C) The owner agrees on the date of the premium finance loan to sell the policy or any portion of the policy’s death benefit on any date following the issuance of the policy, not including an agreement to sell the policy in the event of a default, provided that the default is not pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this act.

(2) “Life settlement contract” does not include any of the following:

(A) A policy loan by a life insurance company pursuant to the terms of the life insurance policy or accelerated death provisions contained in the life insurance policy, whether issued with the original policy or as a rider.

(B) A premium finance loan, as defined herein, or any loan made by a bank or other licensed financial institution, provided that neither default on the loan nor the transfer of the policy in connection with the default is pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this act.

(C) A collateral assignment of a life insurance policy by an owner.

(D) A loan made by a lender that does not violate Article 5.8 (commencing with Section 778) of Chapter 1 of Part 2, provided the loan is not described in paragraph (1), and is not otherwise within the definition of life settlement contract.

(E) An agreement where all of the parties satisfy one of the following conditions:

(i) They are closely related to the insured by blood or law.

(ii) They have a lawful substantial economic interest in the continued life, health, and bodily safety of the person insured.

(iii) They are trusts established primarily for the benefit of those parties.

(F) Any designation, consent, or agreement by an insured who is an employee of an employer in connection with the purchase by the employer, or by a trust established by the employer of life insurance on the life of the employee.

(G) A bona fide business succession planning arrangement:

(i) Between one or more shareholders in a corporation or between a corporation and one or more of its shareholders or one or more trusts established by its shareholders.

(ii) Between one or more partners in a partnership or between a partnership and one or more of its partners or one or more trusts established by its partners.

(iii) Between one or more members in a limited liability company or between a limited liability company and one or more of its members or one or more trusts established by its members.

(H) An agreement entered into by a service recipient, or a trust established by the service recipient, and a service provider, or a trust established by the service provider, who performs significant services for the service recipient’s trade or business.

(I) Any other contract, transaction, or arrangement from the definition of “life settlement contract” that the commissioner determines is not of the type intended to be regulated by this act.

(l) “Net death benefit” means the amount of the life insurance policy or certificate to be settled less any outstanding debts or liens.

(m) “Owner” means the owner of a life insurance policy or a certificate holder under a group policy, with or without a terminal illness, who enters or seeks to enter into a life settlement contract. For the purposes of this article, an owner shall not be limited to an owner of a life insurance policy or a certificate holder under a group policy that insures the life of an individual with a terminal illness or condition except where specifically addressed. The term “owner” does not include any of the following:

(1) Any provider or other licensee under this act.

(2) A qualified institutional buyer as defined in Rule 144A of the federal Securities Act of 1933, as amended.

(3) A financing entity.

(4) A special purpose entity.

(5) A related provider trust.

(n) “Patient identifying information” means an insured’s address, telephone number, facsimile number, electronic mail address, photograph or likeness, employer, employment status, social security number, or any other information that is likely to lead to the identification of the insured.

(o) “Person” means any natural person or legal entity, including, but not limited to, a partnership, limited liability company, association, trust, or corporation.

(p) “Policy” means an individual or group policy, group certificate, contract, or arrangement of life insurance owned by a resident of this state, regardless of whether delivered or issued for delivery in this state.

(q) “Premium finance loan” is a loan made primarily for the purpose of making premium payments on a life insurance policy, which loan is secured by an interest in such life insurance policy.

(r) “Provider” means a person, other than an owner, who enters into or effectuates a life settlement contract with an owner. A provider does not include any of the following:

(1) Any bank, savings bank, savings and loan association, or credit union.

(2) A licensed lending institution or creditor or secured party pursuant to a premium finance loan agreement which takes an assignment of a life insurance policy or certificate issued pursuant to a group life insurance policy as collateral for a loan.

(3) The insurer of a life insurance policy or rider to the extent of providing accelerated death benefits or riders or cash surrender value.

(4) A purchaser.

(5) Any authorized or eligible insurer that provides stop loss coverage to a provider, purchaser, financing entity, special purpose entity, or related provider trust.

(6) A financing entity.

(7) A related provider trust.

(8) A broker.

(9) An accredited investor or qualified institutional buyer as defined respectively in Regulation D, Rule 501 or Rule 144A of the federal Securities Act of 1933, as amended, who purchases a life settlement policy from a provider.

(s) “Purchaser” means a person who pays compensation or anything of value as consideration for a beneficial interest in a trust which is vested with, or for the assignment, transfer, or sale of, an ownership or other interest in a life insurance policy or a certificate issued pursuant to a group life insurance policy which has been the subject of a life settlement contract.

(t) “Related provider trust” means a titling trust or other trust established by a licensed provider or a financing entity for the sole purpose of holding the ownership or beneficial interest in purchased policies in connection with a financing transaction. In order to qualify as a related provider trust, the trust must have a written agreement with the licensed provider under which the licensed provider is responsible for ensuring compliance with all statutory and regulatory requirements and under which the trust agrees to make all records and files relating to life settlement transactions available to the Department of Insurance as if those records and files were maintained directly by the licensed provider.

(u) “Settled policy” means a life insurance policy or certificate that has been acquired by a provider pursuant to a life settlement contract.

(v) “Special purpose entity” means a corporation, partnership, trust, limited liability company, or other legal entity whose securities pay a fixed rate of return commensurate with established asset-backed capital markets, or has been formed solely to provide either directly or indirectly access to institutional capital markets:

(1) For a financing entity or provider.

(2) In connection with a transaction in which the securities in the special purpose entity are acquired by the owner or by a “qualified institutional buyer” as defined in Rule 144 promulgated under the federal Securities Act of 1933, as amended.

(w) “Stranger-originated life insurance” or “STOLI” is an act, practice, or arrangement to initiate the issuance of a life insurance policy in this state for the benefit of a third-party investor who, at the time of policy origination, has no insurable interest, under the laws of this state, in the life of the insured. STOLI practices include, but are not limited to, cases in which life insurance is purchased with resources or guarantees from or through a person or entity, that, at the time of policy inception, could not lawfully initiate the policy himself, herself, or itself, and where, at the time of inception, there is an arrangement or agreement, to directly or indirectly transfer the ownership of the policy or the policy benefits to a third party. Trusts that are created to give the appearance of insurable interest and that are used to initiate policies for investors violate insurable interest laws and the prohibition against wagering on life. STOLI arrangements do not include lawful life settlement contracts as permitted by the act that added this section or those practices set forth in paragraph (2) of subdivision (k), provided that they are not for the purpose of evading regulation under this act.

(x) “Terminally ill” means having an illness or sickness that can reasonably be expected to result in death in 24 months or less.

(y) “This act” shall refer to the act in the 2009–10 Regular Session that added Sections 10113.1 to 10113.35, inclusive, and as it may from time to time be amended.

history: (History: Repealed and added by Stats. 2009, Ch. 343, Sec. 3. (SB 98) Effective January 1, 2010.)

article: 1. General Provisions


text:
(a) This section applies to any person entering into, brokering, or soliciting life settlements pursuant to this section and Sections 10113.1 and 10113.3.

(b) (1) Except as provided in subparagraph (B) or (D), a person may not enter into, broker, or solicit life settlements pursuant to Section 10113.1 unless that person has been licensed by the commissioner under this section. The person shall file an application for a license in the form prescribed by the commissioner, and the application shall be accompanied by a fee of one hundred seventy-one dollars ($171). The annual license renewal fee shall be one hundred seventy-one dollars ($171). The applicant shall provide any information the commissioner may require. The commissioner may issue a license, or deny the application if, in the commissioner’s discretion, it is determined that it is contrary to the interests of the public to issue a license to the applicant. The reasons for a denial shall be set forth in writing.

(A) An individual acting as a broker under this section shall complete at least 15 hours of continuing education related to life settlements and life settlement transactions, as required and approved by the commissioner, prior to operating as a broker. This requirement shall not apply to a life insurance producer who qualifies under subparagraph (D).

(B) A person licensed as an attorney, certified public accountant, or financial planner accredited by a nationally recognized accreditation agency, who is retained to represent the owner, and whose compensation is not paid directly or indirectly by the provider or purchaser, may negotiate a life settlement contract on behalf of the owner without having to obtain a license as a broker.

(C) A person licensed to act as a viatical settlement broker or provider as of December 31, 2009, shall be deemed qualified for licensure as a life settlement broker or provider, and shall be subject to all the provisions of this article as if the person were originally licensed as a life settlement broker or provider.

(D) (i) A life insurance producer who has been duly licensed as a life agent for at least one year or as a licensed nonresident producer in this state for one year shall be deemed to meet the licensing requirements of this section and shall be permitted to operate as a broker.

(ii) Not later than 10 days from the first day of operating as a broker, the life insurance producer shall notify the commissioner that the life insurance producer is acting as a broker, on a form prescribed by the commissioner, and shall pay a fee of eighty-five dollars ($85).

(iii) The fee shall be paid by the life insurance producer for each license term the producer intends to operate as a broker. The fee shall be calculated pursuant to Section 1750. The notification to the commissioner shall include an acknowledgment by the life insurance producer that the life insurance producer will operate as a broker in accordance with this act.

(iv) The insurer that issued the policy that is the subject of a life settlement contract shall not be responsible for any act or omission of a broker or provider arising out of, or in connection with, the life settlement transaction, unless the insurer receives compensation for the replacement of the life settlement contract for the provider or broker.

(E) The commissioner shall review the examination for the licensing of life insurance agents and may recommend any changes to the examination to the department’s curriculum committee in order to carry out the purposes of this section and Sections 10113.1 and 10113.3.

(2) Except as provided in subparagraphs (A) and (B), whenever it appears to the commissioner that it is contrary to the interests of the public for a person licensed pursuant to this section to continue to transact life settlements business, the commissioner or their designee shall issue a notice to the licensee stating the reasons therefor. If, after a hearing, the commissioner concludes that it is contrary to the interests of the public for the licensee to continue to transact life settlements business, the commissioner may revoke the person’s license, or issue an order suspending the license for a period as determined by the commissioner. Any hearing conducted pursuant to this paragraph shall be in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, except that the hearing may be conducted by administrative law judges chosen pursuant to Section 11502 or appointed by the commissioner, and the commissioner shall have the powers granted therein.

(A) The commissioner may, without hearing, suspend or revoke the license of a broker, as defined in subdivision (b) of Section 10113.1, if the broker has done one or more of the following:

(i) Been convicted of a felony.

(ii) Been convicted of a misdemeanor specified by this code or by other laws regulating insurance.

(iii) Had a previously issued professional, occupational, or vocational license suspended or revoked for cause by a licensing authority within the preceding five years of the commissioner’s action on grounds that would preclude the granting of a license by the commissioner under this section.

(B) A judgment, plea, or verdict of guilty, or a plea of nolo contendere is deemed to be a conviction within the meaning of subparagraph (A). If the commissioner issues an order based on a plea that does not at any time result in a judgment of conviction, the commissioner shall vacate the order upon petition by the broker.

(3) Each licensee shall owe and pay in advance to the commissioner an annual renewal fee in an amount to be determined by the commissioner pursuant to paragraph (1) of subdivision (b). This fee shall be for each license year, as defined by Section 1629.

(4) Any licensee that intends to discontinue transacting life settlements in this state shall so notify the commissioner, and shall surrender its license.

(c) A life settlements licensee shall file with the department a copy of all life settlement forms used in this state. A licensee may not use any life settlement form in this state unless it has been provided in advance to the commissioner. The commissioner may disapprove a life settlement form if, in the commissioner’s discretion, the form, or provisions contained therein, are contrary to the interests of the public, or otherwise misleading or unfair to the consumer. In the case of disapproval, the licensee may, within 15 days of notice of the disapproval, request a hearing before the commissioner or the commissioner’s designee, and the hearing shall be held within 30 days of the request.

(d) Life settlements licensees shall be required to provide any applicant for a life settlement contract, at the time of application for the life settlement contract, all of the following disclosures in writing and signed by the owner, in at least 12-point type:

(1) That there are possible alternatives to life settlements, including, but not limited to, accelerated benefits options that may be offered by the life insurer.

(2) The fact that some or all of the proceeds of a life settlement may be taxable and that assistance should be sought from a professional tax adviser.

(3) Consequences for interruption of public assistance as provided by information provided by the State Department of Health Care Services and the State Department of Social Services under Section 11022 of the Welfare and Institutions Code.

(4) That the proceeds from a life settlement could be subject to the claims of creditors.

(5) That entering into a life settlement contract may cause other rights or benefits, including conversion rights and waiver of premium benefits that may exist under the policy or certificate of a group policy to be forfeited by the owner and that assistance should be sought from a professional financial adviser.

(6) That a change in ownership of the settled policy could limit the insured’s ability to purchase insurance in the future on the insured’s life because there is a limit to how much coverage insurers will issue on one life.

(7) That the owner has a right to rescind a life settlement contract within 30 days of the date it is executed by all parties and the owner has received all required disclosures, or 15 days from receipt by the owner of the proceeds of the settlement, whichever is sooner. Rescission, if exercised by the owner, is effective only if both notice of rescission is given and the owner repays all proceeds and any premiums, loans, and loan interest paid on account of the provider within the rescission period. If the insured dies during the rescission period, the contract shall be deemed to have been rescinded subject to repayment by the owner or the owner’s estate of all proceeds and any premiums, loans, and loan interest to the provider.

(8) That proceeds will be sent to the owner within three business days after the provider has received the insurer or group administrator’s acknowledgment that ownership of the policy or the interest in the certificate has been transferred and the beneficiary has been designated in accordance with the terms of the life settlement contract.

(9) The date by which the funds will be available to the owner and the transmitter of the funds.

(10) The disclosure document shall include the following language: “All medical, financial, or personal information solicited or obtained by a provider or broker about an insured, including the insured’s identity or the identity of family members, a spouse, or a significant other may be disclosed as necessary to effect the life settlement contract between the owner and provider. If you are asked to provide this information, you will be asked to consent to the disclosure. The information may be provided to someone who buys the policy or provides funds for the purchase. You may be asked to renew your permission to share information every two years.” (11) That the insured may be contacted by either the provider or the broker or its authorized representative for the purpose of determining the insured’s health status or to verify the insured’s address. This contact is limited to once every three months if the insured has a life expectancy of more than one year, and no more than once per month if the insured has a life expectancy of one year or less.

(12) Any affiliations or contractual relations between the provider and the broker, and the affiliation, if any, between the provider and the issuer of the policy to be settled.

(13) That a broker represents exclusively the owner, and not the insurer or the provider or any other person, and owes a fiduciary duty to the owner, including a duty to act according to the owner’s instructions and in the best interest of the owner.

(14) The name, business address, and telephone number of the broker.

(e) Prior to the execution of the life settlement contract by all parties, the life settlement provider entering into a life settlement contract with the owner shall provide, in a document signed by the owner, the gross purchase price the life settlement provider is paying for the policy, the amount of the purchase price to be paid to the owner, the amount of the purchase price to be paid to the owner’s life settlement broker, and the name, business address, and telephone number of the life settlement broker. For purposes of this section, “gross purchase price” means the total amount or value paid by the provider for the purchase of one or more life insurance policies, including commissions and fees.

(f) The broker shall provide the owner and the insured with at least all of the following disclosures in writing prior to the signing of the life settlement contract by all parties. The disclosures shall be clearly displayed in the life settlement contract or in a separate document signed by the owner:

(1) The name, business address, and telephone number of the broker.

(2) A full, complete, and accurate description of all of the offers, counteroffers, acceptances, and rejections relating to the proposed life settlement contract.

(3) A disclosure of any affiliations or contractual arrangements between the broker and any person making an offer in connection with the proposed life settlement contract.

(4) All estimates of the life expectancy of the insured that are obtained by the licensee in connection with the life settlement, unless that disclosure would violate any California or federal privacy laws.

(5) The commissioner may consider any failure to provide the disclosures or rights described in this section as a basis for suspending or revoking a broker’s or provider’s license pursuant to paragraph (2) of subdivision (b).

(g) All medical information solicited or obtained by any person soliciting or entering into a life settlement is subject to Article 6.6 (commencing with Section 791) of Chapter 1 of Part 2 of Division 1, concerning confidentiality of medical information.

(h) Except as otherwise allowed or required by law, a provider, broker, insurance company, insurance producer, information bureau, rating agency, or company, or any other person with actual knowledge of an insured’s identity, shall not disclose the identity of an insured or information that there is a reasonable basis to believe that could be used to identify the insured or the insured’s financial or medical information to any other person unless the disclosure is one of the following:

(1) It is necessary to effect a life settlement contract between the owner and a provider and the owner and insured have provided prior written consent to the disclosure.

(2) It is necessary to effectuate the sale of life settlement contracts, or interests therein, as investments, provided the sale is conducted in accordance with applicable state and federal securities law and provided further that the owner and the insured have both provided prior written consent to the disclosure.

(3) It is provided in response to an investigation or examination by the commissioner or any other governmental officer or agency or any other provision of law.

(4) It is a term or condition to the transfer of a policy by one provider to another provider, in which case the receiving provider shall be required to comply with the confidentiality requirements of Article 6.6 (commencing with Section 791) of Chapter 1 of Part 2 of Division 1.

(5) It is necessary to allow the provider or broker or their authorized representatives to make contacts for the purpose of determining health status. For the purposes of this section, the term “authorized representative” shall not include any person who has or may have any financial interest in the settlement contract other than a provider, licensed broker; further, a provider or broker shall require its authorized representative to agree in writing to adhere to the privacy provisions of this act.

(6) It is required to purchase stop loss coverage.

(i) In addition to other questions an insurance carrier may lawfully pose to a life insurance applicant, insurance carriers may inquire in the application for insurance whether the proposed owner intends to pay premiums with the assistance of financing from a lender that will use the policy as collateral to support the financing.

(1) If the premium finance loan provides funds that can be used for a purpose other than paying for the premiums, costs, and expenses associated with obtaining and maintaining the life insurance policy and loan, the application may be rejected as a prohibited practice under this act.

(2) If the financing does not violate paragraph (1), the existence of premium financing may not be the sole criterion employed by an insurer in a decision whether to reject an application for life insurance. The insurance carrier may make disclosures to the applicant, either on the application or an amendment to the application to be completed no later than the delivery of the policy, including, but not limited to, the following: “If you have entered into a loan arrangement where the policy is used as collateral, and the policy changes ownership at some point in the future in satisfaction of the loan, the following may be true:(A) A change of ownership could lead to a stranger owning an interest in the insured’s life.(B) A change of ownership could in the future limit your ability to purchase insurance on the insured’s life because there is a limit to how much coverage insurers will issue on a life.(C) You should consult a professional adviser since a change in ownership in satisfaction of the loan may result in tax consequences to the owner, depending on the structure of the loan.” (3) In addition to the disclosures in paragraph (2), the insurance carrier may require the following certifications from the applicant or the insured: “(A) I have not entered into any agreement or arrangement under which I have agreed to make a future sale of this life insurance policy.(B) My loan arrangement for this policy provides funds sufficient to pay for some or all of the premiums, costs, and expenses associated with obtaining and maintaining my life insurance policy, but I have not entered into any agreement by which I am to receive consideration in exchange for procuring this policy.(C) The borrower has an insurable interest in the insured.” (j) Life insurers shall provide individual life insurance policyholders with a statement informing them that if they are considering making changes in the status of their policy, they should consult with a licensed insurance or financial adviser. The statement may accompany or be included in notices or mailings otherwise provided to the policyholders.

(k) The commissioner may, whenever the commissioner deems it reasonably necessary to protect the interests of the public, examine the business and affairs of any licensee or applicant for a license. The commissioner shall have the authority to order any licensee or applicant to produce any records, books, files, or other information as is reasonably necessary to ascertain whether or not the licensee or applicant is acting or has acted in violation of the law or otherwise contrary to the interests of the public. The expenses incurred in conducting any examination shall be paid by the licensee or applicant.

(l) The commissioner may investigate the conduct of any licensee, its officers, employees, agents, or any other person involved in the business of the licensee, or any applicant for a license, whenever the commissioner has reason to believe that the licensee or applicant for a license may have acted, or may be acting, in violation of the law, or otherwise contrary to the interests of the public. The commissioner may initiate an investigation on the commissioner’s own initiative, or upon a complaint filed by any other person.

(m) The commissioner may issue orders to licensees whenever the commissioner determines that it is reasonably necessary to ensure or obtain compliance with this section, or Section 10113.3. This authority includes, but is not limited to, orders directing a licensee to cease and desist in any practice that is in violation of this section, or Section 10113.3, or otherwise contrary to the interests of the public. Any licensee to which an order pursuant to this subdivision is issued may, within 15 days of receipt of that order, request a hearing at which the licensee may challenge the order.

(n) The commissioner may, after notice and a hearing at which it is determined that a licensee has violated this section or Section 10113.3 or any order issued pursuant to this section, order the licensee to pay a monetary penalty of up to ten thousand dollars ($10,000), which may be recovered in a civil action. Any hearing conducted pursuant to this subdivision shall be in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, except that the hearing may be conducted by administrative law judges chosen pursuant to Section 11502 or appointed by the commissioner, and the commissioner shall have the powers granted therein.

(o) Each licensed provider shall file with the commissioner on or before March 1 of each year an annual statement in the form prescribed by the commissioner. The information that the commissioner may require in the annual statement shall include, but not be limited to, the total number, aggregate face amount, and life settlement proceeds of policies settled during the immediately preceding calendar year, together with a breakdown of the information by policy issue year. The annual statement shall also include the names of the insurance companies whose policies have been settled and the brokers that have settled those policies, and that information shall be received in confidence within the meaning of Section 7929.000 of the Government Code and exempt from disclosure pursuant to the Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code). The annual statement shall not include individual transaction data regarding the business of life settlements or information that there is a reasonable basis to believe could be used to identify the owner or the insured.

(p) A person who is not a resident of California may not receive or maintain a license unless a written designation of an agent for service of process is filed and maintained with the commissioner. The provisions of Article 3 (commencing with Section 1600) of Chapter 4 of Part 2 of Division 1 shall apply to life settlements licensees as if they were foreign insurers, their license a certificate of authority, and the life settlements a policy, and the commissioner may modify the agreement set forth in Section 1604 accordingly.

(q) A person licensed pursuant to this section shall not engage in any false or misleading advertising, solicitation, or practice. In no case shall a broker or provider, directly or indirectly, market, advertise, solicit, or otherwise promote the purchase of a new policy for the sole purpose of or with a primary emphasis on settling the policy or use the words “free,” “no cost,” or words of similar import in the marketing, advertising, soliciting, or otherwise promoting of the purchase of a policy. The provisions of Article 6 (commencing with Section 780) and Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 shall apply to life settlements licensees as if they were insurers, their license a certificate of authority or producer’s license, and the life settlements a policy, and the commissioner shall liberally construe these provisions so as to protect the interests of the public.

(r) Any person who enters into a life settlement with a life settlements licensee shall have the absolute right to rescind the settlement within 30 days of the date it is executed by all parties and the owner has received all required disclosures, or 15 days from receipt by the owner of the proceeds of the settlement, whichever is sooner, and any waiver or settlement language contrary to this subdivision shall be void. Rescission, if exercised by the owner, is effective only if both notice of rescission is given and the owner repays all proceeds and any premiums, loans, and loan interest paid on account of the provider within the rescission period. If the insured dies during the rescission period, the contract shall be deemed to have been rescinded subject to repayment by the owner or the owner’s estate of all proceeds and any premiums, loans, and loan interest to the provider.

(s) Records of all consummated transactions and life settlement contracts shall be maintained by the provider for three years after the death of the insured and shall be available to the commissioner for inspection during reasonable business hours.

(t) A violation of this section is a misdemeanor.

history: (History: Amended by Stats. 2023, Ch. 204, Sec. 14. (AB 1140) Effective January 1, 2024.)

article: 1. General Provisions