Document Archive > California Legislative Updates

November 14, 2012

Shifting Gears

With the election behind us and congressional make-up remaining mostly intact, we must expect that Health Care Reform will proceed as we know it, as modified by the issuance of future interim final rules and final regulations. State laws, regardless of where employers are, will become the source of significant new legislation, whether it be to conform to federal rules or to adopt state nuances to the federal rules. Multi-state organizations will have significant new challenges when it comes to state-dictated insured health care plan design, eligibility and disclosure requirements.

 

The purpose of this Memorandum is to discuss new California legislation involving the California Health Benefit Exchange, small group health reforms, and new mandated health plan coverage. Additionally, we will discuss a mandate for a study of and ultimate adoption of a Bay Area Commuter Benefit Ordinance. We also include an update on Health San Francisco.

 

Once we see the emerging trend of multi-state legislation, we will provide relevant summaries to assist multi-state employers.

ACA-Related Legislation

California Health Benefit Exchange

AB 792 (eff. 1/1/2014): To encourage individuals to go to the California Health Benefit Exchange (Exchange) to obtain health insurance coverage, the California legislature has adopted a set of notice and disclosure requirements. Health Care Service Organizations and insurers issuing policies in California (Issuers) will provide notices to individuals when their health coverage terminates about the availability of “low cost” coverage through the Exchange or event “no-cost” coverage through Medi-Cal as well as other notices. The Exchange must have model notices developed by July 1, 2013. The notices will apply to heath plans only (excepted plans and Medicare supplement plans are exempt). These rules do not apply to self-insured plans.

 

A New Wrinkle. In actions for divorce or dissolution of marriage, the California Superior Courts also must provide notices to both parties regarding the availability of the low cost and no cost coverage options referred to above!

 

We expect the State will provide guidance on these new notices in late 2013.

 

AB 1761 (eff. 1/1/2014): AB 1761 provides for the licensing of solicitors on behalf of the Exchange. This bill will prohibit an individual or entity from holding himself or herself out as representing the Exchange without an agreement with the Exchange to do so. Any health plan that promotes itself as a member of the Exchange when in fact it is not, also will be in violation of the fair business practices defined by California law.

The law is quite specific here: An individual cannot provide quotes, illustrations, or statements discussing the content of the health plan or insurer financial performance, etc. It also prohibits advertising by unauthorized individuals. In brief, it appears the legislature expects certain enterprising individuals to seize the moment when there are millions of prospects who will have the opportunity to enroll in the Exchange. The law requires the Exchange to create a mechanism for licensing its own solicitors. We expect that currently licensed agents will also need to be licensed with the Exchange.

Essential Health Benefits

AB 1453 and SB 951 (eff. 1/1/2014): Recent federal guidance provided for the ability of each state to define their own set of Essential Health Benefits as defined by ACA by using an existing major health benefit plan sold in that state as a benchmark. California’s new law will set the level of Essential Health Benefits to be modeled on the Kaiser Permanente Small Group HMO 30 Plan. The bill will prohibit treatment limits imposed on these benefits from exceeding the corresponding limits imposed by the Kaiser benchmark plan and will generally prohibit a plan from making substitutions of the benefits required to be covered.

 

Exempt Plans. Plans exempt from the benchmark coverage requirement will include grandfathered health plans, excepted benefits plans, Medicare supplement plans, and self-insured plans.

 

Kaiser Permanente Small Group HMO 30 Plan. Individual and small group health insurance policies issued, amended, or renewed on or after January 1, 2014 must, at the minimum, include the following benefits:

·        Health benefits within the categories identified in Section 1302(b) of ACA: ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, including behavioral health treatment, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, and pediatric services, including oral and vision care.

·        The health benefits covered by the Kaiser Foundation Health Plan Small Group HMO 30 plan (federal health product identification number 40513CA035) as this plan was offered during the first quarter of 2012, as follows, regardless of whether the benefits are specifically referenced in the plan contract or evidence of coverage for that plan:

o   Medically necessary basic health care services, as defined in subdivision (b) of Section 1345 of the Health and Safety Code and in Section 1300.67 of Title 28 of the California Code of Regulations.

o   The health benefits mandated by the State pursuant to statutes enacted before December 31, 2011 (preventive services for children, prescription drug coverage for contraceptives, diabetes, breast cancer screening, maternity hospital stay, mental health parity, autism/behavioral health treatment, etc.).

o   The health benefits covered by the plan that are not otherwise required to be covered by the State (i.e. acupuncture, tobacco cessation).

CO-OPs

AB 1846 (eff. 1/1/2013): AB 1846 establishes a licensing framework at the California Department of Insurance (CDI) and the Department of Managed Health Care (DMHC) for ACA’s new type of health plan, the Consumer Operated and Oriented Plan (CO-OP). Once licensed as a CO-OP, a health plan can then seek funding under ACA.

 

The bill defines a CO-OP as a non-profit, member-run health insurance Issuer that will be newly licensed under state law to offer qualified-health plans (QHPs) in the individual and small group market. CO-OPs, once licensed, will be allowed to sell health plans both inside and outside the Health Benefit Exchange. This bill would further mandate that a CO-OP must adhere to the Health Benefit Exchange's standards and its selective contracting requirements, including rate negotiations. 

 

We can expect these types of plans to be established and promoted by licensed general agents and insurance brokers. However, the CO-OP must be run by its members. Since these arrangements would contain unrelated employers, they would be subject to the Multiple Employer Welfare Arrangement (MEWA) rules now in effect. The new law will require the plans to be insured and to meet the same requirements that a California-based insurance company must meet. Since the State requires a certificate of authority, it will also enforce an insurance company level of financial responsibility, as well as the same plan design and disclosure requirements applicable to insurance companies. It’s worth noting that federal loans will be available.

Small Group Insurance Market Reform

AB 1083 (eff. 1/1/2014): The ACA itself institutes various health care insurance market reforms (i.e. guaranteed issue and guaranteed renewal) that take effect with respect to plan years on or after January 1, 2014. To achieve conformance with ACA, AB 1083 will require each health insurance issuer (Issuer) that offers health insurance coverage in the individual or group market in California to accept every employer and individual in the state that applies for that coverage and to renew that coverage at the option of the plan sponsor or the individual (except for non-payment of premium).

 

This bill also revises the definition of “small employer” to include self-employed individuals who have no other employees to groups with no more than 50 employees until January 1, 2016, at which time the maximum number of employees increases from 50 to 100 employees.

 

AB 1083 will require the following reforms in the small group insurance market:

·        Prohibition against Pre-Existing Condition Exclusions. A group health benefit plan (grandfathered and nongrandfathered) may not impose any preexisting condition or waivered condition upon any enrollee.

·        Eligibility Rules. A group health benefit plan must not establish rules for eligibility, including continued eligibility, of an individual, or dependent of an individual, to enroll under the terms of the plan based on any of the following health status-related factors:

o   Health status.

o   Medical condition, including physical and mental illnesses.

o   Claims experience.

o   Receipt of health care.

o   Medical history.

o   Genetic information.

o   Evidence of insurability, including conditions arising out of acts of domestic violence.

o   Disability.

o   Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the Public Health Service Act.

·        Nongrandfathered Small Employer Plans: On or after October 1, 2013, Issuers must offer, market, and sell all of its nongrandfathered plans that are sold in the small group market to all small employers in the State or, for purposes of HMO coverage, in the service areas where coverage is currently available.

Issuers of nongrandfathered plans must provide open enrollment periods consistent with ACA and special enrollment periods and coverage effective dates consistent with the individual nongrandfathered market. For purposes of underwriting, Issuers may only use age and geographic region for rating nongrandfathered small employer plans.

·        The bill authorizes the DMHC and CDI to adopt emergency regulations implementing the bill's provisions regarding grandfathered plans by August 31, 2013.

·        Effective March 1, 2013, AB 1803 will require Issuers to report the number of enrollees and covered lives that receive coverage under specified contracts or policies to the State, and will require that information to be posted on the DMHC and CDI websites.

·        Comprehensive and Detailed. This piece of legislation contains a significant amount of detail. For more information please go to the bill’s webpage.

State-Mandated Benefits

Autism

SB 946 (eff. 7/1/2012). Every health insurance contract in California that provides hospital, medical, or surgical benefits must also provide coverage for behavioral health treatment (BHT) for pervasive developmental disorder or autism. Previously, autism was covered more generally under AB 88 (Mental Health Parity Law of 1999) which requires that any treatment provided for severe mental illnesses to be comparable to the benefits provided for any other medical condition if deemed medically necessary. 

Mammography

AB 137 (eff. 1/1/2013). This bill provides that specified health care service plan contracts, except specialized health care service plan contracts, and individual or group policies of health insurance shall be deemed to provide coverage for mammographies for screening or diagnostic purposes upon referral of a participating nurse practitioner, participating certified nurse-midwife, participating physician assistant, or participating physician, as specified., based on need regardless of age.

Major Risk Medical Program

AB 1526 (eff. 1/1/2013): For the period commencing January 1, 2013 to December 31, 2013, inclusive, this bill authorizes the Major Risk Medical Insurance Program (MRMIP) to continue to subsidize subscriber contributions based on a specified percentage of the standard average individual risk rate for comparable coverage, as specified. The bill would prohibit the amount of any subsidy provided to subscribers from affecting the calculation of premiums for certain products.

AB 1580 (eff. 1/1/2013): AB 1580 extends the availability of subsidies for premium contributions paid by individuals receiving coverage under the Major Risk Medical Insurance Program (MRMIP) from January 1, 2013, to December 31, 2013.

Bay Area Commuter Benefits

SB 1339 (eff. 1/1/2013). SB 1339 authorizes a pilot program in the San Francisco Bay Area that allows the Metropolitan Transportation Commission (MTC) and the Bay Area Air Quality Management District (BAAQMD) to jointly adopt an ordinance sometime prior to January 1, 2017, requiring covered employers (50 or more employees) to offer covered employees specified commute benefits. 

 

The bill allows the MTC and BAAQMD, acting together, to adopt a commute benefit ordinance that requires covered employers to offer one of the following options to their covered employees: 

·        A pretax option consistent with federal law allowing covered employees to exclude from taxable wages employee transit pass, vanpool, or bicycle commuting costs; 

·        An employer-paid benefit whereby the covered employer offers a subsidy to offset the transit or vanpool commuting costs; and,

·        Transportation furnished by the covered employer at no or low cost to the covered employee in a vanpool, bus, or multi-passenger vehicle operated by or for the employer.

Other Legislation of Note

AB 2386 (eff. 1/1/2013). AB 2386 clarifies that breastfeeding and related medical conditions are included in the definition of 'sex' as protected category for unlawful employment discrimination under state law.

 

AB 2252 (eff. 1/1/2013). This bill requires an Issuer providing dental coverage to provide 45-day notice to contracting dentists of any changes to the plan's rules, regulations, guidelines, policies or procedures concerning dental provider contracting or coverage of or payment for dental services. The bill also requires dental plans that automatically renew provider contracts to provide, upon request, an annual summary of the revised contract and any changes made during the preceding year.

Healthy San Francisco

As you know, San Francisco’s Health Care Security Ordinance (Healthy San Francisco) requires for-profit employers with 20 or more employees (and nonprofits with 50 or more employees) to spend a minimum amount on health care for covered employees and to report on these expenditures annually.

 

Employers with employees working in San Francisco (Covered Employers) must file an annual report to the City on its health care expenditures made for the employees working in San Francisco. Covered Employers must file the 2012 Annual Reporting Form (ARF) no later than April 30, 2013.

 

Health Care Expenditure Rates. Effective January 1, 2013, the health care expenditure rate for large employers (100+ employees) will be $2.33/hour (up from $2.20/hour in 2012). For medium-sized employers (20-99 employees), the 2013 rate will be $1.55/hour (up from $1.46/hour in 2012). Small employers with 1 to 19 employees are not covered.

 

2013 Annual Salary Exemption.  An employee who is a manager, supervisor, or confidential employee and who earns at or above an annual salary of $86,593 in 2013 will be exempt from coverage under the HCSO. (The 2012 annual salary amount is $84,041, or $40.41/hour.)