SB 1375: Health insurance: small employer groups.

Existing law, the federal Patient Protection and Affordable Care Act (PPACA), enacts various health care coverage market reforms. Among other things, PPACA prohibits a group health plan and a health insurance issuer offering group health insurance coverage from applying a waiting period that exceeds 90 days.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance. Existing law provides for the regulation of small employer, grandfathered small employer, and nongrandfathered small employer health care service plan contracts and health insurance policies, as defined. Existing law governs the health care coverage that may be provided to eligible employees of small employers and defines a small employer for these purposes. Existing law defines an eligible employee for purposes of these provisions to refer to an employee who is actively engaged on a full-time basis in the conduct of the business of the small employer with a normal workweek of at least 30 hours, at the small employers regular places of business, who has met any statutorily authorized applicable waiting period requirements, and specifically includes sole proprietors and partners of a partnership if they are actively engaged on a full-time basis in the small employers business and included as employees under a health care service plan contract or health benefit plan of a small employer.

This bill would delete sole proprietors, partners of a partnership, and the spouses of sole proprietors and partners from the definition of eligible employee for purposes of those provisions. The bill would provide, with respect to a sole proprietorship that consists only of the sole proprietor and his or her spouse, or a partnership that consists solely of partners and their spouses, that the sole proprietor or the partner, as applicable, and the spouses of those persons, are not considered employees for purposes of determining eligibility for small employer coverage. The bill would prohibit employer group health care service plans and employer group health benefit plans from being issued, marketed, or sold to a sole proprietorship or partnership without employees directly or indirectly through any arrangement, and would require that only individual health care service plans and individual health benefit plans be sold to any entity without employees. The bill would also revise the definition of a small employer to include any small employer, as defined, who purchases coverage through any arrangement, except as specified. The bill would also make clarifying changes.

Because a willful violation of the bills requirements relative to health care service plans would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.