AB 2072: Group health care coverage: biomedical industry.
- Session Year: 2023-2024
- House: Assembly
- Latest Version Date: 2024-09-22
Current Status:
Passed
(2024-09-22: Chaptered by Secretary of State - Chapter 374, Statutes of 2024.)
Introduced
In Committee
First Chamber
In Committee
Second Chamber
Enacted
What does this bill do?
The bill extends until 2030 a rule that allows certain employer associations called MEWAs (multiple employers joining to offer health coverage) to buy large‑group health contracts or policies for their small‑employer members, affecting those associations, the small businesses that join them, and the health plans and insurers that sell the coverage. It also requires the Department of Managed Health Care and the Department of Insurance to provide recent MEWA compliance filings to the Legislature, study whether MEWA large‑group coverage affects affordability and access for small businesses, and publish summary reports online in 2026.
The summary is provided by generative AI which can make mistakes. For original language, please view the details in the table below.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene), 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 individual, small employer, grandfathered small employer, and nongrandfathered small employer health care service plan contracts and health insurance policies, as defined.
Existing federal law, the federal Employee Retirement Income Security Act of 1974 (ERISA), authorizes multiple employer welfare arrangements (MEWAs) in which 2 or more employers join together to provide health care coverage for employees or to their beneficiaries. Under existing state law, the status of each distinct member of an association determines whether that members association coverage is individual, small group, or large group health coverage.
Existing law, until January 1, 2026, authorizes an association of employers to offer a large group health care service plan contract or large group health insurance policy to small group employer members of the association consistent with ERISA if certain requirements are met, including that the association is the sponsor of a MEWA that has offered a large group health care service plan contract since January 1, 2012, in connection with an employee welfare benefit plan under ERISA, provides a specified level of coverage, and includes coverage for common law employees, and their dependents, who are employed by an association member in the biomedical industry with operations in California. Existing law also requires an association and MEWA to annually file evidence of ongoing compliance with these requirements in a manner specified by the departments.
This bill would require the departments, on or before June 30, 2026, to provide the health policy committees of the Legislature the most recent annual filings of compliance. The bill would require the Department of Managed Health Care to conduct an analysis of the impacts on the small employer health insurance market in California of health care service plans currently issuing large group contracts to small employers through MEWAs, as specified. The bill would require the Department of Insurance to conduct an analysis of the impacts on the small employer health insurance market in California of health insurers currently issuing large group policies to small employers through MEWAs, as specified. The bill would authorize the departments to coordinate with each other. The bill would require the departments to post reports summarizing their analysis on their internet websites by July 1, 2026.
This bill would extend the sunset date of January 1, 2026, to January 1, 2030, for the authorization of this type of health care service plan and insurance policy. By extending the authorization for a specific type of health care service plan, this bill would correspondingly extend the applicability of the crime for a violation of Knox-Keene, thereby imposing 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.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene), 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 individual, small employer, grandfathered small employer, and nongrandfathered small employer health care service plan contracts and health insurance policies, as defined.
Existing federal law, the federal Employee Retirement Income Security Act of 1974 (ERISA), authorizes multiple employer welfare arrangements (MEWAs) in which 2 or more employers join together to provide health care coverage for employees or to their beneficiaries. Under existing state law, the status of each distinct member of an association determines whether that members association coverage is individual, small group, or large group health coverage.
Existing law, until January 1, 2026, authorizes an association of employers to offer a large group health care service plan contract or large group health insurance policy to small group employer members of the association consistent with ERISA if certain requirements are met, including that the association is the sponsor of a MEWA that has offered a large group health care service plan contract since January 1, 2012, in connection with an employee welfare benefit plan under ERISA, provides a specified level of coverage, and includes coverage for common law employees, and their dependents, who are employed by an association member in the biomedical industry with operations in California. Existing law also requires an association and MEWA to annually file evidence of ongoing compliance with these requirements in a manner specified by the departments.
This bill would require the departments, on or before June 30, 2026, to provide the health policy committees of the Legislature the most recent annual filings of compliance. The bill would require the Department of Managed Health Care to conduct an analysis of the impacts on the small employer health insurance market in California of health care service plans currently issuing large group contracts to small employers through MEWAs, as specified. The bill would require the Department of Insurance to conduct an analysis of the impacts on the small employer health insurance market in California of health insurers currently issuing large group policies to small employers through MEWAs, as specified. The bill would authorize the departments to coordinate with each other. The bill would require the departments to post reports summarizing their analysis on their internet websites by July 1, 2026.
This bill would extend the sunset date of January 1, 2026, to January 1, 2030, for the authorization of this type of health care service plan and insurance policy. By extending the authorization for a specific type of health care service plan, this bill would correspondingly extend the applicability of the crime for a violation of Knox-Keene, thereby imposing 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.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene), 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 individual, small employer, grandfathered small employer, and nongrandfathered small employer health care service plan contracts and health insurance policies, as defined.
Existing federal law, the federal Employee Retirement Income Security Act of 1974 (ERISA), authorizes multiple employer welfare arrangements (MEWAs) in which 2 or more employers join together to provide health care coverage for employees or to their beneficiaries. Under existing state law, the status of each distinct member of an association determines whether that members association coverage is individual, small group, or large group health coverage.
Existing law, until January 1, 2026, authorizes an association of employers to offer a large group health care service plan contract or large group health insurance policy to small group employer members of the association consistent with ERISA if certain requirements are met, including that the association is the sponsor of a MEWA that has offered a large group health care service plan contract since January 1, 2012, in connection with an employee welfare benefit plan under ERISA, provides a specified level of coverage, and includes coverage for common law employees, and their dependents, who are employed by an association member in the biomedical industry with operations in California. Existing law also requires an association and MEWA to annually file evidence of ongoing compliance with these requirements in a manner specified by the departments.
This bill would require the departments, on or before June 30, 2032, 2026, to provide the health policy committees of the Legislature the most recent annual filings and would require the departments to recommend to the Legislature whether any of those MEWAs should remain operative based on compliance with the above-described requirements. filings of compliance. The bill would require the Department of Managed Health Care to conduct an analysis of the impacts on the small employer health insurance market in California of health care service plans currently issuing large group contracts to small employers through MEWAs, as specified. The bill would require the Department of Insurance to conduct an analysis of the impacts on the small employer health insurance market in California of health insurers currently issuing large group policies to small employers through MEWAs, as specified. The bill would authorize the departments to coordinate with each other. The bill would require the departments to post reports summarizing their analysis on their internet websites by July 1, 2026.
This bill would extend the sunset date of January 1, 2026, to January 1, 2033, 2030, for the authorization of this type of health care service plan and insurance policy. By extending the authorization for a specific type of health care service plan, this bill would correspondingly extend the applicability of the crime for a violation of Knox-Keene, thereby imposing 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.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene), 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 individual, small employer, grandfathered small employer, and nongrandfathered small employer health care service plan contracts and health insurance policies, as defined.
Existing federal law, the federal Employee Retirement Income Security Act of 1974 (ERISA), authorizes multiple employer welfare arrangements (MEWAs) in which 2 or more employers join together to provide health care coverage for employees or to their beneficiaries. Under existing state law, the status of each distinct member of an association determines whether that members association coverage is individual, small group, or large group health coverage.
Existing law, until January 1, 2026, authorizes an association of employers to offer a large group health care service plan contract or large group health insurance policy to small group employer members of the association consistent with ERISA if certain requirements are met, including that the association is the sponsor of a MEWA that has offered a large group health care service plan contract since January 1, 2012, in connection with an employee welfare benefit plan under ERISA, provides a specified level of coverage, and includes coverage for common law employees, and their dependents, who are employed by an association member in the biomedical industry with operations in California. Existing law also requires an association and MEWA to annually file evidence of ongoing compliance with these requirements in a manner specified by the departments.
This bill would require the departments, on or before June 30, 2032, to provide the health policy committees of the Legislature the most recent annual filings and would require the departments to recommend to the Legislature whether any of those MEWAs should remain operative based on compliance with the above-described requirements.
This bill would repeal extend the sunset date of January 1, 2026, to January 1, 2033, for the authorization of this type of health care service plan and insurance policy, thereby authorizing these plans and policies indefinitely. By indefinitely policy. By extending the authorization for a specific type of health care service plan, this bill would correspondingly extend the applicability of the crime for a violation of Knox-Keene, thereby imposing 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.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene), 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 individual, small employer, grandfathered small employer, and nongrandfathered small employer health care service plan contracts and health insurance policies, as defined.
Existing federal law, the federal Employee Retirement Income Security Act of 1974 (ERISA), authorizes multiple employer welfare arrangements (MEWAs) in which 2 or more employers join together to provide health care coverage for employees or to their beneficiaries. Under existing state law, the status of each distinct member of an association determines whether that members association coverage is individual, small group, or large group health coverage.
Existing law, until January 1, 2026, authorizes an association of employers to offer a large group health care service plan contract or large group health insurance policy to small group employer members of the association consistent with ERISA if certain requirements are met, including that the association is the sponsor of a MEWA that has offered a large group health care service plan contract since January 1, 2012, in connection with an employee welfare benefit plan under ERISA, provides a specified level of coverage, and includes coverage for common law employees, and their dependents, who are employed by an association member in the biomedical industry with operations in California.
This bill would repeal the sunset date of January 1, 2026, for the authorization of this type of health care service plan and insurance policy, thereby authorizing these plans and policies indefinitely. By indefinitely extending the authorization for a specific type of health care service plan, this bill would correspondingly extend the applicability of the crime for a violation of Knox-Keene, thereby imposing 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.
(a)(1)Each plan shall fairly and affirmatively offer, market, and sell all of the plans small employer health care service plan contracts to all small employers in each service area in which the plan provides or arranges for the provision of health care services.
(2)Each plan shall make available to each small employer all small employer health care service plan contracts that the plan offers and sells to small employers or to associations that include small employers in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health coverage.
(B)(i)Notwithstanding subparagraphs (A) and (C), an association of employers may offer a large group health care service plan contract consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(III)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health care service plan contract in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)As of January 1, 2019, the large group health care service plan contract offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 1367.008, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health care service plan contract provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations adopted pursuant to that section.
(V)The large group health care service plan contract includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health care service plan contract in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(VI)The large group health care service plan contract offers only fully insured benefits through a health care service plan licensed by the department or a health insurance policy with a disability insurer that is licensed by the Department of Insurance. The benefits offered under the large group health care service plan contract shall be considered fully insured only if the terms of the health care service plan contract provide for benefits, the amount of all of which the department determines are guaranteed under a health care service plan contract issued by a health care service plan licensed by the department.
(VII)The number of total employees, including employees described in subclause (V), employed by all participating employers in each year is at least 101 employees.
(VIII)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(IX)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(X)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health care service plan contract, in form and in substance.
(XI)The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health care service plan contract based on health status or claims of any employee or dependent.
(XII)The MEWA files an application for registration with the department on or before June 1, 2022.
(ia)A MEWA that timely registers with the department and that is found to be in compliance with this clause shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), a MEWA that does not meet the requirements of sub-subclause (ia) shall be subject to the restrictions provided in subparagraph (A).
(ii)(I)On or after June 1, 2022, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in clause (i) or unless the MEWA filed an application for registration pursuant to clause (i) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in clause (i).
(II)The department may issue guidance to health care service plans and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(C)(i)Notwithstanding subparagraphs (A) and (B), an association of employers may offer a large group health care service plan contract to small group employer members of the association, consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state, was established prior to March 23, 2010, has been in continuous existence since that date, and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA (29 U.S.C. Sec. 1002(5)). The association is the sponsor of a multiple employer welfare arrangement (MEWA), as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144), is headquartered in California, and is in full compliance with all applicable state and federal laws.
(III)The MEWA has offered a large group health care service plan since January 1, 2012, in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)The large group health care service plan offers to employees a level of coverage having an actuarial value or equivalent to, or greater than, the platinum level of coverage pursuant to Section 1367.009 available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code and provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations pursuant to that section.
(V)The large group health care service plan includes coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California.
(VI)The large group health care service plan offers only fully insured benefits through an insurance contract with a health care service plan licensed by the Department of Managed Health Care.
(VII)Association members purchasing health coverage have a minimum of four full-time common law employees and are current employer members of the association sponsoring the MEWA. Employer members of the association subsidize employee premiums by at least 51 percent.
(VIII)The association is an organization with business and organizational purposes unrelated to the provision of health care benefits and existed prior to the establishment of the MEWA offering the employee welfare benefit plan.
(IX)The participating member employers have a commonality of interests from being in the same industry, unrelated to the provision of health care benefits.
(X)Membership in the association is open solely to employers, and the participating member employers, either directly or indirectly, exercise control over the employee welfare benefit plan, the MEWA, and the large group health care service plan contract, both in form and substance.
(XI)The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issued and renewable for member employers, as well as their employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health status or claims of any person. An employer otherwise eligible is not excluded from participating in a MEWA, or offering or renewing the large group health care service plan contract based on health status or claims of any employee or dependent.
(XII)The MEWA at all times covers at least 101 employees.
(XIII)The association and the MEWA file applications for registration with the department on or before June 1, 2022.
(ia)An association and MEWA that timely register with the department prior to June 1, 2022, and that are found to be in compliance with this clause, shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), an association and MEWA that do not meet the requirements of sub-subclause (ia) shall be subject to the restrictions provided in subparagraph (A).
(ic)An association and MEWA that have registered with the department and fail to show ongoing compliance in their annual filing shall be subject to the restrictions in subparagraph (A).
(id)On or before June 30, 2026, the department shall provide the health policy committees of the Legislature the most recent filings made pursuant to sub-subclause (ia).
(ie)The filings to be submitted pursuant to sub-subclause (id) shall be submitted in compliance with Section 9795 of the Government Code.
(ii)(I)On or after June 1, 2022, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care service plan coverage to any association or MEWA that provides any benefit to a resident in this state unless the association and MEWA have registered with the department and are found to be in compliance with the requirements set forth in clause (i), or unless the association and MEWA filed applications for registration pursuant to clause (i) and the applications are pending before the department. The department shall have the authority to determine compliance with the requirements set forth in clause (i).
(II)The department may issue guidance to health care service plans, associations, and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement subject to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(iii)(I)The department shall conduct an analysis of the impacts on the small employer health insurance market in California of health care service plans currently issuing large group contracts to small employers through MEWAs. The department shall post a report summarizing its analysis on its internet website by July 1, 2026.
(II)The purpose of the analysis is to determine the extent to which coverage of Californians in existing MEWAs has any detrimental impact on the affordability and access to small group health insurance for small businesses in California who do not purchase health insurance through a MEWA.
(III)The department may coordinate with the Department of Insurance.
(IV)Health care service plans and MEWAs shall comply with requests for information from the department to complete this analysis.
(V)The department may contract with a consultant or consultants with expertise to assist the department in its analysis. Contracts entered into pursuant to the authority in this subclause shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Article 4 (commencing with Section 19130) of Chapter 5 of Part 2 of Division 5 of Title 2 of the Government Code, and the State Contract Act (Chapter 1 (commencing with Section 10100) of Part 2 of Division 2 of the Public Contract Code).
(3)A plan that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraphs (1) and (2) with respect to small employer health care service plan contracts offered through the Exchange in those geographic regions in which the plan offers plan contracts through the Exchange.
(b)A plan shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Each plan shall provide special enrollment periods consistent with the special enrollment periods described in Section 1399.849, to the extent permitted by PPACA, except for both of the following:
(1)The special enrollment period described in paragraph (3) of subdivision (c) of Section 1399.849.
(2)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to plan contracts offered through the Exchange.
(c)A plan or solicitor shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health care service plan contract that is provided in connection with the employees employment or membership in a guaranteed association.
(d)Every plan shall file with the director the reasonable employee participation requirements and employer contribution requirements that will be applied in offering its plan contracts. Participation requirements shall be applied uniformly among all small employer groups, except that a plan may vary application of minimum employee participation requirements by the size of the small employer group and whether the employer contributes 100 percent of the eligible employees premium. Employer contribution requirements shall not vary by employer size. A health care service plan shall not establish a participation requirement that (1) requires a person who meets the definition of a dependent in Section 1357.500 to enroll as a dependent if the person is otherwise eligible for coverage and wishes to enroll as an eligible employee and (2) allows a plan to reject an otherwise eligible small employer because of the number of persons that waive coverage due to coverage through another employer. Members of an association eligible for health coverage under subdivision (m) of Section 1357.500, but not electing any health coverage through the association, shall not be counted as eligible employees for purposes of determining whether the guaranteed association meets a plans reasonable participation standards.
(e)The plan shall not reject an application from a small employer for a small employer health care service plan contract if all of the following conditions are met:
(1)The small employer offers health benefits to 100 percent of its eligible employees. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(3)The small employer agrees to inform the small employers employees of the availability of coverage and the provision that those not electing coverage must wait until the next open enrollment or a special enrollment period to obtain coverage through the group if they later decide they would like to have coverage.
(4)The employees and their dependents who are to be covered by the plan contract work or reside in the service area in which the plan provides or otherwise arranges for the provision of health care services.
(f)A plan or solicitor shall not, directly or indirectly, engage in the following activities:
(1)Encourage or direct small employers to refrain from filing an application for coverage with a plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(2)Encourage or direct small employers to seek coverage from another plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(3)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on an individuals 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.
(g)A plan shall not, directly or indirectly, enter into any contract, agreement, or arrangement with a solicitor that provides for or results in the compensation paid to a solicitor for the sale of a health care service plan contract to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer. This subdivision does not apply to a compensation arrangement that provides compensation to a solicitor on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(h)(1)A policy or contract that covers a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 1357.500, shall not establish rules for eligibility, including continued eligibility, of an individual, or dependent of an individual, to enroll under the terms of the policy or contract based on any of the following health status-related factors:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 1389.1, a health care service plan shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a small employer health care service plan contract. A health care service plan shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(i)(1)A health care service plan shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all enrollees in all nongrandfathered small employer health benefit plans offered by the health care service plan in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the health care service plan outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a health care service plan shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 1367.005, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered small employer health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A health care service plan may vary premium rates for a particular nongrandfathered small employer health care service plan contract from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the plan contract.
(B)The plan contracts provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the plan contract that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for plan contracts that offer those benefits in addition to essential health benefits.
(D)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(E)Administrative costs, excluding any user fees required by the Exchange.
(j)A plan shall comply with the requirements of Section 1374.3.
(k)This section shall remain in effect only until January 1, 2030, and as of that date is repealed.
SEC. 2.Section 1357.503 of the Health and Safety Code, as added by Section 2.3 of Chapter 736 of the Statutes of 2021, is amended to read:1357.503.(a)(1)Each plan shall fairly and affirmatively offer, market, and sell all of the plans small employer health care service plan contracts to all small employers in each service area in which the plan provides or arranges for the provision of health care services.
(2)Each plan shall make available to each small employer all small employer health care service plan contracts that the plan offers and sells to small employers or to associations that include small employers in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health coverage.
(B)Notwithstanding subparagraph (A), an association of employers may offer a large group health care service plan contract consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(i)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(ii)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(iii)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health care service plan contract in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(iv)As of January 1, 2019, the large group health care service plan contract offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 1367.008, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health care service plan contract provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations adopted pursuant to that section.
(v)The large group health care service plan contract includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health care service plan contract in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(vi)The large group health care service plan contract offers only fully insured benefits through a health care service plan licensed by the department or a health insurance policy with a disability insurer that is licensed by the Department of Insurance. The benefits offered under the large group health care service plan contract shall be considered fully insured only if the terms of the health care service plan contract provide for benefits, the amount of all of which the department determines are guaranteed under a health care service plan contract issued by a health care service plan licensed by the department.
(vii)The number of total employees, including employees described in clause (v), employed by all participating employers in each year is at least 101 employees.
(viii)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(ix)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(x)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health care service plan contract, in form and in substance.
(xi)The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health care service plan contract based on health status or claims of any employee or dependent.
(xii)The MEWA files an application for registration with the department on or before June 1, 2022.
(I)A MEWA that timely registers with the department and that is found to be in compliance with this subparagraph shall annually file evidence of ongoing compliance with this subparagraph with the department, in a form and manner set forth by the department.
(II)Except as provided in clause (iii) of subparagraph (C), a MEWA that does not meet the requirements of subclause (I) shall be subject to the restrictions provided in subparagraph (A).
(C)(i)On or after June 1, 2022, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in subparagraph (B) or unless the MEWA filed an application for registration pursuant to subparagraph (B) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in subparagraph (B).
(ii)The department may issue guidance to health care service plans and MEWAs regarding registration and compliance with subparagraph (B). The 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).
(iii)Subparagraph (B) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(3)A plan that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraphs (1) and (2) with respect to small employer health care service plan contracts offered through the Exchange in those geographic regions in which the plan offers plan contracts through the Exchange.
(b)A plan shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Each plan shall provide special enrollment periods consistent with the special enrollment periods described in Section 1399.849, to the extent permitted by PPACA, except for both of the following:
(1)The special enrollment period described in paragraph (3) of subdivision (c) of Section 1399.849.
(2)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to plan contracts offered through the Exchange.
(c)A plan or solicitor shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health care service plan contract that is provided in connection with the employees employment or membership in a guaranteed association.
(d)Every plan shall file with the director the reasonable employee participation requirements and employer contribution requirements that will be applied in offering its plan contracts. Participation requirements shall be applied uniformly among all small employer groups, except that a plan may vary application of minimum employee participation requirements by the size of the small employer group and whether the employer contributes 100 percent of the eligible employees premium. Employer contribution requirements shall not vary by employer size. A health care service plan shall not establish a participation requirement that (1) requires a person who meets the definition of a dependent in Section 1357.500 to enroll as a dependent if the person is otherwise eligible for coverage and wishes to enroll as an eligible employee and (2) allows a plan to reject an otherwise eligible small employer because of the number of persons that waive coverage due to coverage through another employer. Members of an association eligible for health coverage under subdivision (m) of Section 1357.500, but not electing any health coverage through the association, shall not be counted as eligible employees for purposes of determining whether the guaranteed association meets a plans reasonable participation standards.
(e)The plan shall not reject an application from a small employer for a small employer health care service plan contract if all of the following conditions are met:
(1)The small employer offers health benefits to 100 percent of its eligible employees. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(3)The small employer agrees to inform the small employers employees of the availability of coverage and the provision that those not electing coverage must wait until the next open enrollment or a special enrollment period to obtain coverage through the group if they later decide they would like to have coverage.
(4)The employees and their dependents who are to be covered by the plan contract work or reside in the service area in which the plan provides or otherwise arranges for the provision of health care services.
(f)A plan or solicitor shall not, directly or indirectly, engage in the following activities:
(1)Encourage or direct small employers to refrain from filing an application for coverage with a plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(2)Encourage or direct small employers to seek coverage from another plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(3)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on an individuals 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.
(g)A plan shall not, directly or indirectly, enter into any contract, agreement, or arrangement with a solicitor that provides for or results in the compensation paid to a solicitor for the sale of a health care service plan contract to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer. This subdivision does not apply to a compensation arrangement that provides compensation to a solicitor on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(h)(1)A policy or contract that covers a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 1357.500, shall not establish rules for eligibility, including continued eligibility, of an individual, or dependent of an individual, to enroll under the terms of the policy or contract based on any of the following health status-related factors:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 1389.1, a health care service plan shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a small employer health care service plan contract. A health care service plan shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(i)(1)A health care service plan shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all enrollees in all nongrandfathered small employer health benefit plans offered by the health care service plan in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the health care service plan outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a health care service plan shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 1367.005, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered small employer health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A health care service plan may vary premium rates for a particular nongrandfathered small employer health care service plan contract from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the plan contract.
(B)The plan contracts provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the plan contract that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for plan contracts that offer those benefits in addition to essential health benefits.
(D)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(E)Administrative costs, excluding any user fees required by the Exchange.
(j)A plan shall comply with the requirements of Section 1374.3.
(k)This section shall become operative on January 1, 2030.
SEC. 3.Section 10753.05 of the Insurance Code, as amended by Section 9.3 of Chapter 764 of the Statutes of 2021, is amended to read:10753.05.(a)A group or individual policy or contract or certificate of group insurance or statement of group coverage providing benefits to employees of small employers as defined in this chapter shall not be issued or delivered by a carrier subject to the jurisdiction of the commissioner regardless of the situs of the contract or master policyholder or of the domicile of the carrier nor, except as otherwise provided in Sections 10270.91 and 10270.92, shall a carrier provide coverage subject to this chapter until a copy of the form of the policy, contract, certificate, or statement of coverage is filed with and approved by the commissioner in accordance with Sections 10290 and 10291, and the carrier has complied with the requirements of Section 10753.17.
(b)(1)Each carrier shall fairly and affirmatively offer, market, and sell all of the carriers health benefit plans that are sold to, offered through, or sponsored by, small employers or associations that include small employers for plan years on or after January 1, 2014, to all small employers in each geographic region in which the carrier makes coverage available or provides benefits.
(2)A carrier that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraph (1) with respect to health benefit plans offered through the Exchange in those geographic regions in which the carrier offers plans through the Exchange.
(3)A carrier shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Commencing January 1, 2014, a carrier shall provide special enrollment periods consistent with the special enrollment periods described in Section 10965.3, to the extent permitted by PPACA, except for both of the following:
(A)The special enrollment period described in paragraph (3) of subdivision (c) of Section 10965.3.
(B)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to health benefit plans offered through the Exchange.
(4)This section does not require an association, or a trust established and maintained by an association to receive a master insurance policy issued by an admitted insurer and to administer the benefits thereof solely for association members, to offer, market, or sell a benefit plan design to those who are not members of the association. However, if the association markets, offers, or sells a benefit plan design to those who are not members of the association it is subject to the requirements of this section. This section applies to an association that otherwise meets the requirements of paragraph (8) formed by merger of two or more associations after January 1, 1992, if the predecessor organizations had been in active existence on January 1, 1992, and for at least five years prior to that date and met the requirements of paragraph (5).
(5)A carrier which (A) effective January 1, 1992, and at least 20 years prior to that date, markets, offers, or sells benefit plan designs only to all members of one association and (B) does not market, offer, or sell any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits shall not be required to market, offer, or sell to those who are not members of the association. However, if the carrier markets, offers, or sells any benefit plan design or any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits to those who are not members of the association it is subject to the requirements of this section.
(6)Each carrier that sells health benefit plans to members of one association pursuant to paragraph (5) shall submit an annual statement to the commissioner which states that the carrier is selling health benefit plans pursuant to paragraph (5) and which, for the one association, lists all the information required by paragraph (7).
(7)Each carrier that sells health benefit plans to members of any association shall submit an annual statement to the commissioner which lists each association to which the carrier sells health benefit plans, the industry or profession which is served by the association, the associations membership criteria, a list of officers, the state in which the association is organized, and the site of its principal office.
(8)For purposes of paragraphs (4) and (6), an association is a nonprofit organization composed of a group of individuals or employers who associate based solely on participation in a specified profession or industry, accepting for membership any individual or small employer meeting its membership criteria, which do not condition membership directly or indirectly on the health or claims history of any person, which uses membership dues solely for and in consideration of the membership and membership benefits, except that the amount of the dues shall not depend on whether the member applies for or purchases insurance offered by the association, which is organized and maintained in good faith for purposes unrelated to insurance, which has been in active existence on January 1, 1992, and at least five years prior to that date, which has a constitution and bylaws, or other analogous governing documents that provide for election of the governing board of the association by its members, which has contracted with one or more carriers to offer one or more health benefit plans to all individual members and small employer members in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health insurance coverage.
(B)(i)Notwithstanding subparagraphs (A) and (C), an association of employers may offer a large group health insurance policy consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(III)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health insurance policy in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)As of January 1, 2019, the large group health insurance policy offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 10112.295, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health insurance policy provides coverage for essential health benefits consistent with Section 10112.27 and any rules or regulations adopted pursuant to that section.
(V)The large group health insurance policy includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health insurance policy in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(VI)The large group health insurance policy offers only fully insured benefits through a health insurer or disability insurer licensed by the department. The benefits offered under the large group health insurance policy shall be considered fully insured only if the terms of the health insurance policy provide for benefits, the amount of all of which the department determines are guaranteed under a policy of insurance issued by an insurer licensed by the department.
(VII)The number of total employees, including employees described in subclause (V), employed by all participating employers in each year is at least 101 employees.
(VIII)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(IX)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(X)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health insurance policy, in form and in substance.
(XI)The large group health insurance policy is treated as a single-risk-rated policy that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health insurance policy based on health status or claims of any employee or dependent.
(XII)The MEWA files an application for registration with the department on or before June 1, 2022.
(ia)A MEWA that timely registers with the department and that is found to be in compliance with this clause shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), a MEWA that does not meet the requirements of sub-subclause (ia) shall be subject to the restrictions provided in subparagraph (A).
(ii)(I)On or after June 1, 2022, a health insurer shall not market, issue, amend, renew, or deliver large employer health insurance coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in clause (i) or unless the MEWA filed an application for registration pursuant to clause (i) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in clause (i).
(II)The department may issue guidance to health insurers and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1.
(C)(i)Notwithstanding subparagraphs (A) and (B), an association of employers may offer a large group health insurance policy to small group employer members of the association, consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state, was established prior to March 23, 2010, has been in continuous existence since that date, and is a bona fide association or group of employers under ERISA that may act as an employer under Section 3(5) of ERISA (29 U.S.C. Sec. 1002(5)). The association is the sponsor of a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144), is headquartered in California, and is in full compliance with all applicable state and federal laws.
(III)The MEWA has offered a large group health insurance policy since January 1, 2012, in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)The large group health insurance policy offers to employees a level of coverage having an actuarial value or equivalent to, or greater than, the platinum level of coverage pursuant to Section 10112.297 available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and provides coverage for essential health benefits consistent with Section 10112.27 and Article 22 (commencing with Section 2594) of Subchapter 3 of Chapter 5 of Title 10 of the California Code of Regulations.
(V)The large group health insurance policy includes coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California.
(VI)The large group health insurance policy offers only fully insured benefits through a health insurance policy with a health insurer that is licensed by the department.
(VII)The association members purchasing health coverage have a minimum of four full-time common law employees and are current employer members of the association sponsoring the MEWA. Employer members of the association subsidize employee premium by at least 51 percent.
(VIII)The association is an organization with business and organizational purposes unrelated to the provision of health care benefits and existed prior to the establishment of the MEWA offering the employee welfare benefit plan.
(IX)The participating member employers have a commonality of interests from being in the same industry, unrelated to the provision of health care benefits.
(X)Membership in the association is open solely to employers, and the participating member employers, either directly or indirectly, exercise control over the employee welfare benefit plan, the MEWA, and the large group health insurance policy, both in form and substance.
(XI)The large group health insurance policy is treated as a single-risk-rated contract that is guaranteed issued and renewable for member employers, as well as their employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health status or claims of any person. An employer otherwise eligible for coverage is not excluded from participating in a MEWA, or offering or renewing the large group health insurance policy based on health status or claims of any employee or dependent.
(XII)The MEWA at all times covers at least 101 employees.
(XIII)The association and the MEWA file applications for registration with the department on or before June 1, 2022.
(ia)An association and the MEWA that timely register with the department prior to June 1, 2022, and that are found to be in compliance with this clause, shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), an association and MEWA that do not meet the requirements of sub-subclause (ia) shall be subject to the restrictions in subparagraph (A).
(ic)An association and MEWA that have registered with the department and fail to show ongoing compliance in its annual filing shall be subject to the restrictions in subparagraph (A).
(id)On or before June 30, 2026, the department shall provide the health policy committees of the Legislature the most recent filings made pursuant to sub-subclause (ia).
(ie)The filings to be submitted pursuant to sub-subclause (id) shall be submitted in compliance with Section 9795 of the Government Code.
(ii)(I)On or after June 1, 2022, an insurer shall not market, issue, amend, renew, or deliver large employer health insurance coverage to any association or MEWA that provides any benefit to a resident in this state unless the association and MEWA have registered with the department and are found to be in compliance with the requirements set forth in clause (i), or unless the association and MEWA filed applications for registration pursuant to clause (xiii) of clause (i) and the applications are pending before the department. The department shall have the authority to determine compliance with the requirements set forth under clause (i).
(II)The department may issue guidance to health insurers, associations, and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement subject to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1.
(iii)(I)The department shall conduct an analysis of the impacts on the small employer health insurance market in California of health insurers currently issuing large group policies to small employers through MEWAs. The department shall post a report summarizing its analysis on its internet website by July 1, 2026.
(II)The purpose of the analysis is to determine the extent to which coverage of Californians in existing MEWAs has any detrimental impact on the affordability and access to small group health insurance for small businesses in California who do not purchase health insurance through a MEWA.
(III)The department may coordinate with the Department of Managed Health Care.
(IV)Health insurers and MEWAs shall comply with requests for information from the department to complete this analysis.
(V)The department may contract with a consultant or consultants with expertise to assist the department in its analysis. Contracts entered into pursuant to the authority in this subclause shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Article 4 (commencing with Section 19130) of Chapter 5 of Part 2 of Division 5 of Title 2 of the Government Code, and the State Contract Act (Chapter 1 (commencing with Section 10100) of Part 2 of Division 2 of the Public Contract Code).
(c)Each carrier shall make available to each small employer all health benefit plans that the carrier offers or sells to small employers or to associations that include small employers for plan years on or after January 1, 2014. Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(d)Each carrier shall do all of the following:
(1)Prepare a brochure that summarizes all of its health benefit plans and make this summary available to small employers, agents, and brokers upon request. The summary shall include for each plan information on benefits provided, a generic description of the manner in which services are provided, such as how access to providers is limited, benefit limitations, required copayments and deductibles, and a telephone number that can be called for more detailed benefit information. Carriers are required to keep the information contained in the brochure accurate and up to date, and, upon updating the brochure, send copies to agents and brokers representing the carrier. Any entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare a summary brochure which includes that benefit plan.
(2)For each health benefit plan, prepare a more detailed evidence of coverage and make it available to small employers, agents, and brokers upon request. The evidence of coverage shall contain all information that a prudent buyer would need to be aware of in making selections of benefit plan designs. An entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare an evidence of coverage for that health benefit plan.
(3)Provide copies of the current summary brochure to all agents or brokers who represent the carrier and, upon updating the brochure, send copies of the updated brochure to agents and brokers representing the carrier for the purpose of selling health benefit plans.
(4)Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(e)Every agent or broker representing one or more carriers for the purpose of selling health benefit plans to small employers shall do all of the following:
(1)When providing information on a health benefit plan to a small employer but making no specific recommendations on particular benefit plan designs:
(A)Advise the small employer of the carriers obligation to sell to any small employer any of the health benefit plans it offers to small employers, consistent with PPACA, and provide them, upon request, with the actual rates that would be charged to that employer for a given health benefit plan.
(B)Notify the small employer that the agent or broker will procure rate and benefit information for the small employer on any health benefit plan offered by a carrier for whom the agent or broker sells health benefit plans.
(C)Notify the small employer that, upon request, the agent or broker will provide the small employer with the summary brochure required in paragraph (1) of subdivision (d) for any benefit plan design offered by a carrier whom the agent or broker represents.
(D)Notify the small employer of the availability of coverage and the availability of tax credits for certain employers consistent with PPACA and state law, including any rules, regulations, or guidance issued in connection therewith.
(2)When recommending a particular benefit plan design or designs, advise the small employer that, upon request, the agent will provide the small employer with the brochure required by paragraph (1) of subdivision (d) containing the benefit plan design or designs being recommended by the agent or broker.
(3)Prior to filing an application for a small employer for a particular health benefit plan:
(A)For each of the health benefit plans offered by the carrier whose health benefit plan the agent or broker is presenting, provide the small employer with the benefit summary required in paragraph (1) of subdivision (d) and the premium for that particular employer.
(B)Notify the small employer that, upon request, the agent or broker will provide the small employer with an evidence of coverage brochure for each health benefit plan the carrier offers.
(C)Obtain a signed statement from the small employer acknowledging that the small employer has received the disclosures required by this paragraph and Section 10753.16.
(f)A carrier, agent, or broker shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health benefit plan which, in the case of an eligible employee meeting the definition in paragraph (1) of subdivision (f) of Section 10753, is provided in connection with the employees employment or which, in the case of an eligible employee as defined in paragraph (2) of subdivision (f) of Section 10753, is provided in connection with a guaranteed association.
(g)A carrier shall not reject an application from a small employer for a health benefit plan provided:
(1)The small employer as defined by subparagraph (A) of paragraph (1) of subdivision (q) of Section 10753 offers health benefits to 100 percent of its eligible employees as defined in paragraph (1) of subdivision (f) of Section 10753. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(h)(1)A carrier or agent or broker shall not, directly or indirectly, engage in the following activities:
(A)Encourage or direct small employers to refrain from filing an application for coverage with a carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(B)Encourage or direct small employers to seek coverage from another carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(C)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on the individuals 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.
(2)This subdivision shall be enforced in the same manner as Section 790.03, including through Sections 790.035 and 790.05.
(i)A carrier shall not, directly or indirectly, enter into any contract, agreement, or arrangement with an agent or broker that provides for or results in the compensation paid to an agent or broker for a health benefit plan to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer or the small employers employees. This subdivision shall not apply with respect to a compensation arrangement that provides compensation to an agent or broker on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(j)(1)A health benefit plan offered to a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 10753, shall 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:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 10291.5, a carrier shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a health benefit plan. A carrier shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(k)(1)A carrier shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all insureds in all nongrandfathered small employer health benefit plans offered by the carrier in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the carrier outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a carrier shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 10112.27, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A carrier may vary premium rates for a particular nongrandfathered health benefit plan from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the health benefit plan.
(B)The health benefit plans provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the health benefit plan that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for health benefit plans that offer those benefits in addition to essential health benefits.
(D)Administrative costs, excluding any user fees required by the Exchange.
(E)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(l)If a carrier enters into a contract, agreement, or other arrangement with a third-party administrator or other entity to provide administrative, marketing, or other services related to the offering of health benefit plans to small employers in this state, the third-party administrator shall be subject to this chapter.
(m)This section shall remain in effect only until January 1, 2030, and as of that date is repealed.
SEC. 4.Section 10753.05 of the Insurance Code, as added by Section 4.3 of Chapter 736 of the Statutes of 2021, is amended to read:10753.05.(a)A group or individual policy or contract or certificate of group insurance or statement of group coverage providing benefits to employees of small employers as defined in this chapter shall not be issued or delivered by a carrier subject to the jurisdiction of the commissioner regardless of the situs of the contract or master policyholder or of the domicile of the carrier nor, except as otherwise provided in Sections 10270.91 and 10270.92, shall a carrier provide coverage subject to this chapter until a copy of the form of the policy, contract, certificate, or statement of coverage is filed with and approved by the commissioner in accordance with Sections 10290 and 10291, and the carrier has complied with the requirements of Section 10753.17.
(b)(1)Each carrier shall fairly and affirmatively offer, market, and sell all of the carriers health benefit plans that are sold to, offered through, or sponsored by, small employers or associations that include small employers for plan years on or after January 1, 2014, to all small employers in each geographic region in which the carrier makes coverage available or provides benefits.
(2)A carrier that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraph (1) with respect to health benefit plans offered through the Exchange in those geographic regions in which the carrier offers plans through the Exchange.
(3)A carrier shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Commencing January 1, 2014, a carrier shall provide special enrollment periods consistent with the special enrollment periods described in Section 10965.3, to the extent permitted by PPACA, except for both of the following:
(A)The special enrollment period described in paragraph (3) of subdivision (c) of Section 10965.3.
(B)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to health benefit plans offered through the Exchange.
(4)This section does not require an association, or a trust established and maintained by an association to receive a master insurance policy issued by an admitted insurer and to administer the benefits thereof solely for association members, to offer, market, or sell a benefit plan design to those who are not members of the association. However, if the association markets, offers, or sells a benefit plan design to those who are not members of the association, it is subject to the requirements of this section. This section applies to an association that otherwise meets the requirements of paragraph (8) formed by merger of two or more associations after January 1, 1992, if the predecessor organizations had been in active existence on January 1, 1992, and for at least five years prior to that date and met the requirements of paragraph (5).
(5)A carrier which (A) effective January 1, 1992, and at least 20 years that date, markets, offers, or sells benefit plan designs only to all members of one association and (B) does not market, offer, or sell any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits shall not be required to market, offer, or sell to those who are not members of the association. However, if the carrier markets, offers, or sells any benefit plan design or any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits to those who are not members of the association, it is subject to the requirements of this section.
(6)Each carrier that sells health benefit plans to members of one association pursuant to paragraph (5) shall submit an annual statement to the commissioner which states that the carrier is selling health benefit plans pursuant to paragraph (5) and which, for the one association, lists all the information required by paragraph (7).
(7)Each carrier that sells health benefit plans to members of any association shall submit an annual statement to the commissioner which lists each association to which the carrier sells health benefit plans, the industry or profession which is served by the association, the associations membership criteria, a list of officers, the state in which the association is organized, and the site of its principal office.
(8)For purposes of paragraphs (4) and (6), an association is a nonprofit organization composed of a group of individuals or employers who associate based solely on participation in a specified profession or industry, accepting for membership any individual or small employer meeting its membership criteria, which do not condition membership directly or indirectly on the health or claims history of any person, which uses membership dues solely for and in consideration of the membership and membership benefits, except that the amount of the dues shall not depend on whether the member applies for or purchases insurance offered by the association, which is organized and maintained in good faith for purposes unrelated to insurance, which has been in active existence on January 1, 1992, and at least five years before that date, which has a constitution and bylaws, or other analogous governing documents that provide for election of the governing board of the association by its members, which has contracted with one or more carriers to offer one or more health benefit plans to all individual members and small employer members in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health insurance coverage.
(B)Notwithstanding subparagraph (A), an association of employers may offer a large group health insurance policy consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(i)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(ii)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(iii)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health insurance policy in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(iv)As of January 1, 2019, the large group health insurance policy offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 10112.295, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health insurance policy provides coverage for essential health benefits consistent with Section 10112.27 and any rules or regulations adopted pursuant to that section.
(v)The large group health insurance policy includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health insurance policy in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(vi)The large group health insurance policy offers only fully insured benefits through a health insurer or disability insurer licensed by the department. The benefits offered under the large group health insurance policy shall be considered fully insured only if the terms of the health insurance policy provide for benefits, the amount of all of which the department determines are guaranteed under a policy of insurance issued by an insurer licensed by the department.
(vii)The number of total employees, including employees described in clause (v), employed by all participating employers in each year is at least 101 employees.
(viii)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(ix)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(x)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health insurance policy, in form and in substance.
(xi)The large group health insurance policy is treated as a single-risk-rated policy that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health insurance policy based on health status or claims of any employee or dependent.
(xii)The MEWA files an application for registration with the department on or before June 1, 2022.
(I)A MEWA that timely registers with the department and that is found to be in compliance with this subparagraph shall annually file evidence of ongoing compliance with this subparagraph with the department, in a form and manner set forth by the department.
(II)Except as provided in clause (iii) of subparagraph (C), a MEWA that does not meet the requirements of subclause (I) shall be subject to the restrictions provided in subparagraph (A).
(C)(i)On or after June 1, 2022, a health insurer shall not market, issue, amend, renew, or deliver large employer health insurance coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in subparagraph (B) or unless the MEWA filed an application for registration pursuant to subparagraph (B) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in subparagraph (B).
(ii)The department may issue guidance to health insurers and MEWAs regarding registration and compliance with subparagraph (B). The 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).
(iii)Subparagraph (B) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1.
(c)Each carrier shall make available to each small employer all health benefit plans that the carrier offers or sells to small employers or to associations that include small employers for plan years on or after January 1, 2014. Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(d)Each carrier shall do all of the following:
(1)Prepare a brochure that summarizes all of its health benefit plans and make this summary available to small employers, agents, and brokers upon request. The summary shall include for each plan information on benefits provided, a generic description of the manner in which services are provided, such as how access to providers is limited, benefit limitations, required copayments and deductibles, and a telephone number that can be called for more detailed benefit information. Carriers are required to keep the information contained in the brochure accurate and up to date, and, upon updating the brochure, send copies to agents and brokers representing the carrier. Any entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare a summary brochure which includes that benefit plan.
(2)For each health benefit plan, prepare a more detailed evidence of coverage and make it available to small employers, agents, and brokers upon request. The evidence of coverage shall contain all information that a prudent buyer would need to be aware of in making selections of benefit plan designs. An entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare an evidence of coverage for that health benefit plan.
(3)Provide copies of the current summary brochure to all agents or brokers who represent the carrier and, upon updating the brochure, send copies of the updated brochure to agents and brokers representing the carrier for the purpose of selling health benefit plans.
(4)Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(e)Every agent or broker representing one or more carriers for the purpose of selling health benefit plans to small employers shall do all of the following:
(1)When providing information on a health benefit plan to a small employer but making no specific recommendations on particular benefit plan designs:
(A)Advise the small employer of the carriers obligation to sell to any small employer any of the health benefit plans it offers to small employers, consistent with PPACA, and provide them, upon request, with the actual rates that would be charged to that employer for a given health benefit plan.
(B)Notify the small employer that the agent or broker will procure rate and benefit information for the small employer on any health benefit plan offered by a carrier for whom the agent or broker sells health benefit plans.
(C)Notify the small employer that, upon request, the agent or broker will provide the small employer with the summary brochure required in paragraph (1) of subdivision (d) for any benefit plan design offered by a carrier whom the agent or broker represents.
(D)Notify the small employer of the availability of coverage and the availability of tax credits for certain employers consistent with PPACA and state law, including any rules, regulations, or guidance issued in connection therewith.
(2)When recommending a particular benefit plan design or designs, advise the small employer that, upon request, the agent will provide the small employer with the brochure required by paragraph (1) of subdivision (d) containing the benefit plan design or designs being recommended by the agent or broker.
(3)Prior to filing an application for a small employer for a particular health benefit plan:
(A)For each of the health benefit plans offered by the carrier whose health benefit plan the agent or broker is presenting, provide the small employer with the benefit summary required in paragraph (1) of subdivision (d) and the premium for that particular employer.
(B)Notify the small employer that, upon request, the agent or broker will provide the small employer with an evidence of coverage brochure for each health benefit plan the carrier offers.
(C)Obtain a signed statement from the small employer acknowledging that the small employer has received the disclosures required by this paragraph and Section 10753.16.
(f)A carrier, agent, or broker shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health benefit plan which, in the case of an eligible employee meeting the definition in paragraph (1) of subdivision (f) of Section 10753, is provided in connection with the employees employment or which, in the case of an eligible employee as defined in paragraph (2) of subdivision (f) of Section 10753, is provided in connection with a guaranteed association.
(g)A carrier shall not reject an application from a small employer for a health benefit plan provided:
(1)The small employer as defined by subparagraph (A) of paragraph (1) of subdivision (q) of Section 10753 offers health benefits to 100 percent of its eligible employees as defined in paragraph (1) of subdivision (f) of Section 10753. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(h)(1)A carrier or agent or broker shall not, directly or indirectly, engage in the following activities:
(A)Encourage or direct small employers to refrain from filing an application for coverage with a carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(B)Encourage or direct small employers to seek coverage from another carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(C)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on the individuals 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.
(2)This subdivision shall be enforced in the same manner as Section 790.03, including through Sections 790.035 and 790.05.
(i)A carrier shall not, directly or indirectly, enter into any contract, agreement, or arrangement with an agent or broker that provides for or results in the compensation paid to an agent or broker for a health benefit plan to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer or the small employers employees. This subdivision shall not apply with respect to a compensation arrangement that provides compensation to an agent or broker on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(j)(1)A health benefit plan offered to a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 10753, shall 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:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 10291.5, a carrier shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a health benefit plan. A carrier shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(k)(1)A carrier shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all insureds in all nongrandfathered small employer health benefit plans offered by the carrier in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the carrier outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a carrier shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 10112.27, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A carrier may vary premium rates for a particular nongrandfathered health benefit plan from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the health benefit plan.
(B)The health benefit plans provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the health benefit plan that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for health benefit plans that offer those benefits in addition to essential health benefits.
(D)Administrative costs, excluding any user fees required by the Exchange.
(E)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(l)If a carrier enters into a contract, agreement, or other arrangement with a third-party administrator or other entity to provide administrative, marketing, or other services related to the offering of health benefit plans to small employers in this state, the third-party administrator shall be subject to this chapter.
(m)This section shall become operative on January 1, 2030.
SEC. 5.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)(1)Each plan shall fairly and affirmatively offer, market, and sell all of the plans small employer health care service plan contracts to all small employers in each service area in which the plan provides or arranges for the provision of health care services.
(2)Each plan shall make available to each small employer all small employer health care service plan contracts that the plan offers and sells to small employers or to associations that include small employers in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health coverage.
(B)(i)Notwithstanding subparagraphs (A) and (C), an association of employers may offer a large group health care service plan contract consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(III)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health care service plan contract in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)As of January 1, 2019, the large group health care service plan contract offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 1367.008, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health care service plan contract provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations adopted pursuant to that section.
(V)The large group health care service plan contract includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health care service plan contract in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(VI)The large group health care service plan contract offers only fully insured benefits through a health care service plan licensed by the department or a health insurance policy with a disability insurer that is licensed by the Department of Insurance. The benefits offered under the large group health care service plan contract shall be considered fully insured only if the terms of the health care service plan contract provide for benefits, the amount of all of which the department determines are guaranteed under a health care service plan contract issued by a health care service plan licensed by the department.
(VII)The number of total employees, including employees described in subclause (V), employed by all participating employers in each year is at least 101 employees.
(VIII)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(IX)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(X)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health care service plan contract, in form and in substance.
(XI)The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health care service plan contract based on health status or claims of any employee or dependent.
(XII)The MEWA files an application for registration with the department on or before June 1, 2022.
(ia)A MEWA that timely registers with the department and that is found to be in compliance with this clause shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), a MEWA that does not meet the requirements of sub-subclause (ia) shall be subject to the restrictions provided in subparagraph (A).
(ii)(I)On or after June 1, 2022, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in clause (i) or unless the MEWA filed an application for registration pursuant to clause (i) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in clause (i).
(II)The department may issue guidance to health care service plans and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(C)(i)Notwithstanding subparagraphs (A) and (B), an association of employers may offer a large group health care service plan contract to small group employer members of the association, consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state, was established prior to March 23, 2010, has been in continuous existence since that date, and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA (29 U.S.C. Sec. 1002(5)). The association is the sponsor of a multiple employer welfare arrangement (MEWA), as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144), is headquartered in California, and is in full compliance with all applicable state and federal laws.
(III)The MEWA has offered a large group health care service plan since January 1, 2012, in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)The large group health care service plan offers to employees a level of coverage having an actuarial value or equivalent to, or greater than, the platinum level of coverage pursuant to Section 1367.009 available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code and provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations pursuant to that section.
(V)The large group health care service plan includes coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California.
(VI)The large group health care service plan offers only fully insured benefits through an insurance contract with a health care service plan licensed by the Department of Managed Health Care.
(VII)Association members purchasing health coverage have a minimum of four full-time common law employees and are current employer members of the association sponsoring the MEWA. Employer members of the association subsidize employee premiums by at least 51 percent.
(VIII)The association is an organization with business and organizational purposes unrelated to the provision of health care benefits and existed prior to the establishment of the MEWA offering the employee welfare benefit plan.
(IX)The participating member employers have a commonality of interests from being in the same industry, unrelated to the provision of health care benefits.
(X)Membership in the association is open solely to employers, and the participating member employers, either directly or indirectly, exercise control over the employee welfare benefit plan, the MEWA, and the large group health care service plan contract, both in form and substance.
(XI)The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issued and renewable for member employers, as well as their employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health status or claims of any person. An employer otherwise eligible is not excluded from participating in a MEWA, or offering or renewing the large group health care service plan contract based on health status or claims of any employee or dependent.
(XII)The MEWA at all times covers at least 101 employees.
(XIII)The association and the MEWA file applications for registration with the department on or before June 1, 2022.
(ia)An association and MEWA that timely register with the department prior to June 1, 2022, and that are found to be in compliance with this clause, shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), an association and MEWA that do not meet the requirements of sub-subclause (ia) shall be subject to the restrictions provided in subparagraph (A).
(ic)An association and MEWA that have registered with the department and fail to show ongoing compliance in their annual filing shall be subject to the restrictions in subparagraph (A).
(id)On or before June 30, 2026, the department shall provide the health policy committees of the Legislature the most recent filings made pursuant to sub-subclause (ia).
(ie)The filings to be submitted pursuant to sub-subclause (id) shall be submitted in compliance with Section 9795 of the Government Code.
(ii)(I)On or after June 1, 2022, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care service plan coverage to any association or MEWA that provides any benefit to a resident in this state unless the association and MEWA have registered with the department and are found to be in compliance with the requirements set forth in clause (i), or unless the association and MEWA filed applications for registration pursuant to clause (i) and the applications are pending before the department. The department shall have the authority to determine compliance with the requirements set forth in clause (i).
(II)The department may issue guidance to health care service plans, associations, and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement subject to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(iii)(I)The department shall conduct an analysis of the impacts on the small employer health insurance market in California of health care service plans currently issuing large group contracts to small employers through MEWAs. The department shall post a report summarizing its analysis on its internet website by July 1, 2026.
(II)The purpose of the analysis is to determine the extent to which coverage of Californians in existing MEWAs has any detrimental impact on the affordability and access to small group health insurance for small businesses in California who do not purchase health insurance through a MEWA.
(III)The department may coordinate with the Department of Insurance.
(IV)Health care service plans and MEWAs shall comply with requests for information from the department to complete this analysis.
(V)The department may contract with a consultant or consultants with expertise to assist the department in its analysis. Contracts entered into pursuant to the authority in this subclause shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Article 4 (commencing with Section 19130) of Chapter 5 of Part 2 of Division 5 of Title 2 of the Government Code, and the State Contract Act (Chapter 1 (commencing with Section 10100) of Part 2 of Division 2 of the Public Contract Code).
(3)A plan that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraphs (1) and (2) with respect to small employer health care service plan contracts offered through the Exchange in those geographic regions in which the plan offers plan contracts through the Exchange.
(b)A plan shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Each plan shall provide special enrollment periods consistent with the special enrollment periods described in Section 1399.849, to the extent permitted by PPACA, except for both of the following:
(1)The special enrollment period described in paragraph (3) of subdivision (c) of Section 1399.849.
(2)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to plan contracts offered through the Exchange.
(c)A plan or solicitor shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health care service plan contract that is provided in connection with the employees employment or membership in a guaranteed association.
(d)Every plan shall file with the director the reasonable employee participation requirements and employer contribution requirements that will be applied in offering its plan contracts. Participation requirements shall be applied uniformly among all small employer groups, except that a plan may vary application of minimum employee participation requirements by the size of the small employer group and whether the employer contributes 100 percent of the eligible employees premium. Employer contribution requirements shall not vary by employer size. A health care service plan shall not establish a participation requirement that (1) requires a person who meets the definition of a dependent in Section 1357.500 to enroll as a dependent if the person is otherwise eligible for coverage and wishes to enroll as an eligible employee and (2) allows a plan to reject an otherwise eligible small employer because of the number of persons that waive coverage due to coverage through another employer. Members of an association eligible for health coverage under subdivision (m) of Section 1357.500, but not electing any health coverage through the association, shall not be counted as eligible employees for purposes of determining whether the guaranteed association meets a plans reasonable participation standards.
(e)The plan shall not reject an application from a small employer for a small employer health care service plan contract if all of the following conditions are met:
(1)The small employer offers health benefits to 100 percent of its eligible employees. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(3)The small employer agrees to inform the small employers employees of the availability of coverage and the provision that those not electing coverage must wait until the next open enrollment or a special enrollment period to obtain coverage through the group if they later decide they would like to have coverage.
(4)The employees and their dependents who are to be covered by the plan contract work or reside in the service area in which the plan provides or otherwise arranges for the provision of health care services.
(f)A plan or solicitor shall not, directly or indirectly, engage in the following activities:
(1)Encourage or direct small employers to refrain from filing an application for coverage with a plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(2)Encourage or direct small employers to seek coverage from another plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(3)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on an individuals 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.
(g)A plan shall not, directly or indirectly, enter into any contract, agreement, or arrangement with a solicitor that provides for or results in the compensation paid to a solicitor for the sale of a health care service plan contract to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer. This subdivision does not apply to a compensation arrangement that provides compensation to a solicitor on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(h)(1)A policy or contract that covers a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 1357.500, shall not establish rules for eligibility, including continued eligibility, of an individual, or dependent of an individual, to enroll under the terms of the policy or contract based on any of the following health status-related factors:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 1389.1, a health care service plan shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a small employer health care service plan contract. A health care service plan shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(i)(1)A health care service plan shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all enrollees in all nongrandfathered small employer health benefit plans offered by the health care service plan in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the health care service plan outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a health care service plan shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 1367.005, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered small employer health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A health care service plan may vary premium rates for a particular nongrandfathered small employer health care service plan contract from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the plan contract.
(B)The plan contracts provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the plan contract that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for plan contracts that offer those benefits in addition to essential health benefits.
(D)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(E)Administrative costs, excluding any user fees required by the Exchange.
(j)A plan shall comply with the requirements of Section 1374.3.
(k)This section shall remain in effect only until January 1, 2030, and as of that date is repealed.
SEC. 2.Section 1357.503 of the Health and Safety Code, as added by Section 2.3 of Chapter 736 of the Statutes of 2021, is amended to read:1357.503.(a)(1)Each plan shall fairly and affirmatively offer, market, and sell all of the plans small employer health care service plan contracts to all small employers in each service area in which the plan provides or arranges for the provision of health care services.
(2)Each plan shall make available to each small employer all small employer health care service plan contracts that the plan offers and sells to small employers or to associations that include small employers in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health coverage.
(B)Notwithstanding subparagraph (A), an association of employers may offer a large group health care service plan contract consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(i)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(ii)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(iii)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health care service plan contract in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(iv)As of January 1, 2019, the large group health care service plan contract offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 1367.008, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health care service plan contract provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations adopted pursuant to that section.
(v)The large group health care service plan contract includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health care service plan contract in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(vi)The large group health care service plan contract offers only fully insured benefits through a health care service plan licensed by the department or a health insurance policy with a disability insurer that is licensed by the Department of Insurance. The benefits offered under the large group health care service plan contract shall be considered fully insured only if the terms of the health care service plan contract provide for benefits, the amount of all of which the department determines are guaranteed under a health care service plan contract issued by a health care service plan licensed by the department.
(vii)The number of total employees, including employees described in clause (v), employed by all participating employers in each year is at least 101 employees.
(viii)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(ix)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(x)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health care service plan contract, in form and in substance.
(xi)The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health care service plan contract based on health status or claims of any employee or dependent.
(xii)The MEWA files an application for registration with the department on or before June 1, 2022.
(I)A MEWA that timely registers with the department and that is found to be in compliance with this subparagraph shall annually file evidence of ongoing compliance with this subparagraph with the department, in a form and manner set forth by the department.
(II)Except as provided in clause (iii) of subparagraph (C), a MEWA that does not meet the requirements of subclause (I) shall be subject to the restrictions provided in subparagraph (A).
(C)(i)On or after June 1, 2022, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in subparagraph (B) or unless the MEWA filed an application for registration pursuant to subparagraph (B) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in subparagraph (B).
(ii)The department may issue guidance to health care service plans and MEWAs regarding registration and compliance with subparagraph (B). The 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).
(iii)Subparagraph (B) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(3)A plan that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraphs (1) and (2) with respect to small employer health care service plan contracts offered through the Exchange in those geographic regions in which the plan offers plan contracts through the Exchange.
(b)A plan shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Each plan shall provide special enrollment periods consistent with the special enrollment periods described in Section 1399.849, to the extent permitted by PPACA, except for both of the following:
(1)The special enrollment period described in paragraph (3) of subdivision (c) of Section 1399.849.
(2)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to plan contracts offered through the Exchange.
(c)A plan or solicitor shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health care service plan contract that is provided in connection with the employees employment or membership in a guaranteed association.
(d)Every plan shall file with the director the reasonable employee participation requirements and employer contribution requirements that will be applied in offering its plan contracts. Participation requirements shall be applied uniformly among all small employer groups, except that a plan may vary application of minimum employee participation requirements by the size of the small employer group and whether the employer contributes 100 percent of the eligible employees premium. Employer contribution requirements shall not vary by employer size. A health care service plan shall not establish a participation requirement that (1) requires a person who meets the definition of a dependent in Section 1357.500 to enroll as a dependent if the person is otherwise eligible for coverage and wishes to enroll as an eligible employee and (2) allows a plan to reject an otherwise eligible small employer because of the number of persons that waive coverage due to coverage through another employer. Members of an association eligible for health coverage under subdivision (m) of Section 1357.500, but not electing any health coverage through the association, shall not be counted as eligible employees for purposes of determining whether the guaranteed association meets a plans reasonable participation standards.
(e)The plan shall not reject an application from a small employer for a small employer health care service plan contract if all of the following conditions are met:
(1)The small employer offers health benefits to 100 percent of its eligible employees. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(3)The small employer agrees to inform the small employers employees of the availability of coverage and the provision that those not electing coverage must wait until the next open enrollment or a special enrollment period to obtain coverage through the group if they later decide they would like to have coverage.
(4)The employees and their dependents who are to be covered by the plan contract work or reside in the service area in which the plan provides or otherwise arranges for the provision of health care services.
(f)A plan or solicitor shall not, directly or indirectly, engage in the following activities:
(1)Encourage or direct small employers to refrain from filing an application for coverage with a plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(2)Encourage or direct small employers to seek coverage from another plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(3)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on an individuals 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.
(g)A plan shall not, directly or indirectly, enter into any contract, agreement, or arrangement with a solicitor that provides for or results in the compensation paid to a solicitor for the sale of a health care service plan contract to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer. This subdivision does not apply to a compensation arrangement that provides compensation to a solicitor on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(h)(1)A policy or contract that covers a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 1357.500, shall not establish rules for eligibility, including continued eligibility, of an individual, or dependent of an individual, to enroll under the terms of the policy or contract based on any of the following health status-related factors:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 1389.1, a health care service plan shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a small employer health care service plan contract. A health care service plan shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(i)(1)A health care service plan shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all enrollees in all nongrandfathered small employer health benefit plans offered by the health care service plan in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the health care service plan outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a health care service plan shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 1367.005, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered small employer health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A health care service plan may vary premium rates for a particular nongrandfathered small employer health care service plan contract from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the plan contract.
(B)The plan contracts provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the plan contract that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for plan contracts that offer those benefits in addition to essential health benefits.
(D)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(E)Administrative costs, excluding any user fees required by the Exchange.
(j)A plan shall comply with the requirements of Section 1374.3.
(k)This section shall become operative on January 1, 2030.
SEC. 3.Section 10753.05 of the Insurance Code, as amended by Section 9.3 of Chapter 764 of the Statutes of 2021, is amended to read:10753.05.(a)A group or individual policy or contract or certificate of group insurance or statement of group coverage providing benefits to employees of small employers as defined in this chapter shall not be issued or delivered by a carrier subject to the jurisdiction of the commissioner regardless of the situs of the contract or master policyholder or of the domicile of the carrier nor, except as otherwise provided in Sections 10270.91 and 10270.92, shall a carrier provide coverage subject to this chapter until a copy of the form of the policy, contract, certificate, or statement of coverage is filed with and approved by the commissioner in accordance with Sections 10290 and 10291, and the carrier has complied with the requirements of Section 10753.17.
(b)(1)Each carrier shall fairly and affirmatively offer, market, and sell all of the carriers health benefit plans that are sold to, offered through, or sponsored by, small employers or associations that include small employers for plan years on or after January 1, 2014, to all small employers in each geographic region in which the carrier makes coverage available or provides benefits.
(2)A carrier that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraph (1) with respect to health benefit plans offered through the Exchange in those geographic regions in which the carrier offers plans through the Exchange.
(3)A carrier shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Commencing January 1, 2014, a carrier shall provide special enrollment periods consistent with the special enrollment periods described in Section 10965.3, to the extent permitted by PPACA, except for both of the following:
(A)The special enrollment period described in paragraph (3) of subdivision (c) of Section 10965.3.
(B)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to health benefit plans offered through the Exchange.
(4)This section does not require an association, or a trust established and maintained by an association to receive a master insurance policy issued by an admitted insurer and to administer the benefits thereof solely for association members, to offer, market, or sell a benefit plan design to those who are not members of the association. However, if the association markets, offers, or sells a benefit plan design to those who are not members of the association it is subject to the requirements of this section. This section applies to an association that otherwise meets the requirements of paragraph (8) formed by merger of two or more associations after January 1, 1992, if the predecessor organizations had been in active existence on January 1, 1992, and for at least five years prior to that date and met the requirements of paragraph (5).
(5)A carrier which (A) effective January 1, 1992, and at least 20 years prior to that date, markets, offers, or sells benefit plan designs only to all members of one association and (B) does not market, offer, or sell any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits shall not be required to market, offer, or sell to those who are not members of the association. However, if the carrier markets, offers, or sells any benefit plan design or any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits to those who are not members of the association it is subject to the requirements of this section.
(6)Each carrier that sells health benefit plans to members of one association pursuant to paragraph (5) shall submit an annual statement to the commissioner which states that the carrier is selling health benefit plans pursuant to paragraph (5) and which, for the one association, lists all the information required by paragraph (7).
(7)Each carrier that sells health benefit plans to members of any association shall submit an annual statement to the commissioner which lists each association to which the carrier sells health benefit plans, the industry or profession which is served by the association, the associations membership criteria, a list of officers, the state in which the association is organized, and the site of its principal office.
(8)For purposes of paragraphs (4) and (6), an association is a nonprofit organization composed of a group of individuals or employers who associate based solely on participation in a specified profession or industry, accepting for membership any individual or small employer meeting its membership criteria, which do not condition membership directly or indirectly on the health or claims history of any person, which uses membership dues solely for and in consideration of the membership and membership benefits, except that the amount of the dues shall not depend on whether the member applies for or purchases insurance offered by the association, which is organized and maintained in good faith for purposes unrelated to insurance, which has been in active existence on January 1, 1992, and at least five years prior to that date, which has a constitution and bylaws, or other analogous governing documents that provide for election of the governing board of the association by its members, which has contracted with one or more carriers to offer one or more health benefit plans to all individual members and small employer members in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health insurance coverage.
(B)(i)Notwithstanding subparagraphs (A) and (C), an association of employers may offer a large group health insurance policy consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(III)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health insurance policy in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)As of January 1, 2019, the large group health insurance policy offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 10112.295, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health insurance policy provides coverage for essential health benefits consistent with Section 10112.27 and any rules or regulations adopted pursuant to that section.
(V)The large group health insurance policy includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health insurance policy in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(VI)The large group health insurance policy offers only fully insured benefits through a health insurer or disability insurer licensed by the department. The benefits offered under the large group health insurance policy shall be considered fully insured only if the terms of the health insurance policy provide for benefits, the amount of all of which the department determines are guaranteed under a policy of insurance issued by an insurer licensed by the department.
(VII)The number of total employees, including employees described in subclause (V), employed by all participating employers in each year is at least 101 employees.
(VIII)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(IX)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(X)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health insurance policy, in form and in substance.
(XI)The large group health insurance policy is treated as a single-risk-rated policy that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health insurance policy based on health status or claims of any employee or dependent.
(XII)The MEWA files an application for registration with the department on or before June 1, 2022.
(ia)A MEWA that timely registers with the department and that is found to be in compliance with this clause shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), a MEWA that does not meet the requirements of sub-subclause (ia) shall be subject to the restrictions provided in subparagraph (A).
(ii)(I)On or after June 1, 2022, a health insurer shall not market, issue, amend, renew, or deliver large employer health insurance coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in clause (i) or unless the MEWA filed an application for registration pursuant to clause (i) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in clause (i).
(II)The department may issue guidance to health insurers and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1.
(C)(i)Notwithstanding subparagraphs (A) and (B), an association of employers may offer a large group health insurance policy to small group employer members of the association, consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state, was established prior to March 23, 2010, has been in continuous existence since that date, and is a bona fide association or group of employers under ERISA that may act as an employer under Section 3(5) of ERISA (29 U.S.C. Sec. 1002(5)). The association is the sponsor of a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144), is headquartered in California, and is in full compliance with all applicable state and federal laws.
(III)The MEWA has offered a large group health insurance policy since January 1, 2012, in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)The large group health insurance policy offers to employees a level of coverage having an actuarial value or equivalent to, or greater than, the platinum level of coverage pursuant to Section 10112.297 available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and provides coverage for essential health benefits consistent with Section 10112.27 and Article 22 (commencing with Section 2594) of Subchapter 3 of Chapter 5 of Title 10 of the California Code of Regulations.
(V)The large group health insurance policy includes coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California.
(VI)The large group health insurance policy offers only fully insured benefits through a health insurance policy with a health insurer that is licensed by the department.
(VII)The association members purchasing health coverage have a minimum of four full-time common law employees and are current employer members of the association sponsoring the MEWA. Employer members of the association subsidize employee premium by at least 51 percent.
(VIII)The association is an organization with business and organizational purposes unrelated to the provision of health care benefits and existed prior to the establishment of the MEWA offering the employee welfare benefit plan.
(IX)The participating member employers have a commonality of interests from being in the same industry, unrelated to the provision of health care benefits.
(X)Membership in the association is open solely to employers, and the participating member employers, either directly or indirectly, exercise control over the employee welfare benefit plan, the MEWA, and the large group health insurance policy, both in form and substance.
(XI)The large group health insurance policy is treated as a single-risk-rated contract that is guaranteed issued and renewable for member employers, as well as their employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health status or claims of any person. An employer otherwise eligible for coverage is not excluded from participating in a MEWA, or offering or renewing the large group health insurance policy based on health status or claims of any employee or dependent.
(XII)The MEWA at all times covers at least 101 employees.
(XIII)The association and the MEWA file applications for registration with the department on or before June 1, 2022.
(ia)An association and the MEWA that timely register with the department prior to June 1, 2022, and that are found to be in compliance with this clause, shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), an association and MEWA that do not meet the requirements of sub-subclause (ia) shall be subject to the restrictions in subparagraph (A).
(ic)An association and MEWA that have registered with the department and fail to show ongoing compliance in its annual filing shall be subject to the restrictions in subparagraph (A).
(id)On or before June 30, 2026, the department shall provide the health policy committees of the Legislature the most recent filings made pursuant to sub-subclause (ia).
(ie)The filings to be submitted pursuant to sub-subclause (id) shall be submitted in compliance with Section 9795 of the Government Code.
(ii)(I)On or after June 1, 2022, an insurer shall not market, issue, amend, renew, or deliver large employer health insurance coverage to any association or MEWA that provides any benefit to a resident in this state unless the association and MEWA have registered with the department and are found to be in compliance with the requirements set forth in clause (i), or unless the association and MEWA filed applications for registration pursuant to clause (xiii) of clause (i) and the applications are pending before the department. The department shall have the authority to determine compliance with the requirements set forth under clause (i).
(II)The department may issue guidance to health insurers, associations, and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement subject to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1.
(iii)(I)The department shall conduct an analysis of the impacts on the small employer health insurance market in California of health insurers currently issuing large group policies to small employers through MEWAs. The department shall post a report summarizing its analysis on its internet website by July 1, 2026.
(II)The purpose of the analysis is to determine the extent to which coverage of Californians in existing MEWAs has any detrimental impact on the affordability and access to small group health insurance for small businesses in California who do not purchase health insurance through a MEWA.
(III)The department may coordinate with the Department of Managed Health Care.
(IV)Health insurers and MEWAs shall comply with requests for information from the department to complete this analysis.
(V)The department may contract with a consultant or consultants with expertise to assist the department in its analysis. Contracts entered into pursuant to the authority in this subclause shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Article 4 (commencing with Section 19130) of Chapter 5 of Part 2 of Division 5 of Title 2 of the Government Code, and the State Contract Act (Chapter 1 (commencing with Section 10100) of Part 2 of Division 2 of the Public Contract Code).
(c)Each carrier shall make available to each small employer all health benefit plans that the carrier offers or sells to small employers or to associations that include small employers for plan years on or after January 1, 2014. Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(d)Each carrier shall do all of the following:
(1)Prepare a brochure that summarizes all of its health benefit plans and make this summary available to small employers, agents, and brokers upon request. The summary shall include for each plan information on benefits provided, a generic description of the manner in which services are provided, such as how access to providers is limited, benefit limitations, required copayments and deductibles, and a telephone number that can be called for more detailed benefit information. Carriers are required to keep the information contained in the brochure accurate and up to date, and, upon updating the brochure, send copies to agents and brokers representing the carrier. Any entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare a summary brochure which includes that benefit plan.
(2)For each health benefit plan, prepare a more detailed evidence of coverage and make it available to small employers, agents, and brokers upon request. The evidence of coverage shall contain all information that a prudent buyer would need to be aware of in making selections of benefit plan designs. An entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare an evidence of coverage for that health benefit plan.
(3)Provide copies of the current summary brochure to all agents or brokers who represent the carrier and, upon updating the brochure, send copies of the updated brochure to agents and brokers representing the carrier for the purpose of selling health benefit plans.
(4)Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(e)Every agent or broker representing one or more carriers for the purpose of selling health benefit plans to small employers shall do all of the following:
(1)When providing information on a health benefit plan to a small employer but making no specific recommendations on particular benefit plan designs:
(A)Advise the small employer of the carriers obligation to sell to any small employer any of the health benefit plans it offers to small employers, consistent with PPACA, and provide them, upon request, with the actual rates that would be charged to that employer for a given health benefit plan.
(B)Notify the small employer that the agent or broker will procure rate and benefit information for the small employer on any health benefit plan offered by a carrier for whom the agent or broker sells health benefit plans.
(C)Notify the small employer that, upon request, the agent or broker will provide the small employer with the summary brochure required in paragraph (1) of subdivision (d) for any benefit plan design offered by a carrier whom the agent or broker represents.
(D)Notify the small employer of the availability of coverage and the availability of tax credits for certain employers consistent with PPACA and state law, including any rules, regulations, or guidance issued in connection therewith.
(2)When recommending a particular benefit plan design or designs, advise the small employer that, upon request, the agent will provide the small employer with the brochure required by paragraph (1) of subdivision (d) containing the benefit plan design or designs being recommended by the agent or broker.
(3)Prior to filing an application for a small employer for a particular health benefit plan:
(A)For each of the health benefit plans offered by the carrier whose health benefit plan the agent or broker is presenting, provide the small employer with the benefit summary required in paragraph (1) of subdivision (d) and the premium for that particular employer.
(B)Notify the small employer that, upon request, the agent or broker will provide the small employer with an evidence of coverage brochure for each health benefit plan the carrier offers.
(C)Obtain a signed statement from the small employer acknowledging that the small employer has received the disclosures required by this paragraph and Section 10753.16.
(f)A carrier, agent, or broker shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health benefit plan which, in the case of an eligible employee meeting the definition in paragraph (1) of subdivision (f) of Section 10753, is provided in connection with the employees employment or which, in the case of an eligible employee as defined in paragraph (2) of subdivision (f) of Section 10753, is provided in connection with a guaranteed association.
(g)A carrier shall not reject an application from a small employer for a health benefit plan provided:
(1)The small employer as defined by subparagraph (A) of paragraph (1) of subdivision (q) of Section 10753 offers health benefits to 100 percent of its eligible employees as defined in paragraph (1) of subdivision (f) of Section 10753. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(h)(1)A carrier or agent or broker shall not, directly or indirectly, engage in the following activities:
(A)Encourage or direct small employers to refrain from filing an application for coverage with a carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(B)Encourage or direct small employers to seek coverage from another carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(C)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on the individuals 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.
(2)This subdivision shall be enforced in the same manner as Section 790.03, including through Sections 790.035 and 790.05.
(i)A carrier shall not, directly or indirectly, enter into any contract, agreement, or arrangement with an agent or broker that provides for or results in the compensation paid to an agent or broker for a health benefit plan to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer or the small employers employees. This subdivision shall not apply with respect to a compensation arrangement that provides compensation to an agent or broker on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(j)(1)A health benefit plan offered to a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 10753, shall 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:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 10291.5, a carrier shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a health benefit plan. A carrier shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(k)(1)A carrier shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all insureds in all nongrandfathered small employer health benefit plans offered by the carrier in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the carrier outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a carrier shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 10112.27, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A carrier may vary premium rates for a particular nongrandfathered health benefit plan from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the health benefit plan.
(B)The health benefit plans provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the health benefit plan that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for health benefit plans that offer those benefits in addition to essential health benefits.
(D)Administrative costs, excluding any user fees required by the Exchange.
(E)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(l)If a carrier enters into a contract, agreement, or other arrangement with a third-party administrator or other entity to provide administrative, marketing, or other services related to the offering of health benefit plans to small employers in this state, the third-party administrator shall be subject to this chapter.
(m)This section shall remain in effect only until January 1, 2030, and as of that date is repealed.
SEC. 4.Section 10753.05 of the Insurance Code, as added by Section 4.3 of Chapter 736 of the Statutes of 2021, is amended to read:10753.05.(a)A group or individual policy or contract or certificate of group insurance or statement of group coverage providing benefits to employees of small employers as defined in this chapter shall not be issued or delivered by a carrier subject to the jurisdiction of the commissioner regardless of the situs of the contract or master policyholder or of the domicile of the carrier nor, except as otherwise provided in Sections 10270.91 and 10270.92, shall a carrier provide coverage subject to this chapter until a copy of the form of the policy, contract, certificate, or statement of coverage is filed with and approved by the commissioner in accordance with Sections 10290 and 10291, and the carrier has complied with the requirements of Section 10753.17.
(b)(1)Each carrier shall fairly and affirmatively offer, market, and sell all of the carriers health benefit plans that are sold to, offered through, or sponsored by, small employers or associations that include small employers for plan years on or after January 1, 2014, to all small employers in each geographic region in which the carrier makes coverage available or provides benefits.
(2)A carrier that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraph (1) with respect to health benefit plans offered through the Exchange in those geographic regions in which the carrier offers plans through the Exchange.
(3)A carrier shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Commencing January 1, 2014, a carrier shall provide special enrollment periods consistent with the special enrollment periods described in Section 10965.3, to the extent permitted by PPACA, except for both of the following:
(A)The special enrollment period described in paragraph (3) of subdivision (c) of Section 10965.3.
(B)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to health benefit plans offered through the Exchange.
(4)This section does not require an association, or a trust established and maintained by an association to receive a master insurance policy issued by an admitted insurer and to administer the benefits thereof solely for association members, to offer, market, or sell a benefit plan design to those who are not members of the association. However, if the association markets, offers, or sells a benefit plan design to those who are not members of the association, it is subject to the requirements of this section. This section applies to an association that otherwise meets the requirements of paragraph (8) formed by merger of two or more associations after January 1, 1992, if the predecessor organizations had been in active existence on January 1, 1992, and for at least five years prior to that date and met the requirements of paragraph (5).
(5)A carrier which (A) effective January 1, 1992, and at least 20 years that date, markets, offers, or sells benefit plan designs only to all members of one association and (B) does not market, offer, or sell any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits shall not be required to market, offer, or sell to those who are not members of the association. However, if the carrier markets, offers, or sells any benefit plan design or any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits to those who are not members of the association, it is subject to the requirements of this section.
(6)Each carrier that sells health benefit plans to members of one association pursuant to paragraph (5) shall submit an annual statement to the commissioner which states that the carrier is selling health benefit plans pursuant to paragraph (5) and which, for the one association, lists all the information required by paragraph (7).
(7)Each carrier that sells health benefit plans to members of any association shall submit an annual statement to the commissioner which lists each association to which the carrier sells health benefit plans, the industry or profession which is served by the association, the associations membership criteria, a list of officers, the state in which the association is organized, and the site of its principal office.
(8)For purposes of paragraphs (4) and (6), an association is a nonprofit organization composed of a group of individuals or employers who associate based solely on participation in a specified profession or industry, accepting for membership any individual or small employer meeting its membership criteria, which do not condition membership directly or indirectly on the health or claims history of any person, which uses membership dues solely for and in consideration of the membership and membership benefits, except that the amount of the dues shall not depend on whether the member applies for or purchases insurance offered by the association, which is organized and maintained in good faith for purposes unrelated to insurance, which has been in active existence on January 1, 1992, and at least five years before that date, which has a constitution and bylaws, or other analogous governing documents that provide for election of the governing board of the association by its members, which has contracted with one or more carriers to offer one or more health benefit plans to all individual members and small employer members in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health insurance coverage.
(B)Notwithstanding subparagraph (A), an association of employers may offer a large group health insurance policy consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(i)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(ii)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(iii)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health insurance policy in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(iv)As of January 1, 2019, the large group health insurance policy offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 10112.295, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health insurance policy provides coverage for essential health benefits consistent with Section 10112.27 and any rules or regulations adopted pursuant to that section.
(v)The large group health insurance policy includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health insurance policy in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(vi)The large group health insurance policy offers only fully insured benefits through a health insurer or disability insurer licensed by the department. The benefits offered under the large group health insurance policy shall be considered fully insured only if the terms of the health insurance policy provide for benefits, the amount of all of which the department determines are guaranteed under a policy of insurance issued by an insurer licensed by the department.
(vii)The number of total employees, including employees described in clause (v), employed by all participating employers in each year is at least 101 employees.
(viii)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(ix)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(x)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health insurance policy, in form and in substance.
(xi)The large group health insurance policy is treated as a single-risk-rated policy that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health insurance policy based on health status or claims of any employee or dependent.
(xii)The MEWA files an application for registration with the department on or before June 1, 2022.
(I)A MEWA that timely registers with the department and that is found to be in compliance with this subparagraph shall annually file evidence of ongoing compliance with this subparagraph with the department, in a form and manner set forth by the department.
(II)Except as provided in clause (iii) of subparagraph (C), a MEWA that does not meet the requirements of subclause (I) shall be subject to the restrictions provided in subparagraph (A).
(C)(i)On or after June 1, 2022, a health insurer shall not market, issue, amend, renew, or deliver large employer health insurance coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in subparagraph (B) or unless the MEWA filed an application for registration pursuant to subparagraph (B) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in subparagraph (B).
(ii)The department may issue guidance to health insurers and MEWAs regarding registration and compliance with subparagraph (B). The 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).
(iii)Subparagraph (B) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1.
(c)Each carrier shall make available to each small employer all health benefit plans that the carrier offers or sells to small employers or to associations that include small employers for plan years on or after January 1, 2014. Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(d)Each carrier shall do all of the following:
(1)Prepare a brochure that summarizes all of its health benefit plans and make this summary available to small employers, agents, and brokers upon request. The summary shall include for each plan information on benefits provided, a generic description of the manner in which services are provided, such as how access to providers is limited, benefit limitations, required copayments and deductibles, and a telephone number that can be called for more detailed benefit information. Carriers are required to keep the information contained in the brochure accurate and up to date, and, upon updating the brochure, send copies to agents and brokers representing the carrier. Any entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare a summary brochure which includes that benefit plan.
(2)For each health benefit plan, prepare a more detailed evidence of coverage and make it available to small employers, agents, and brokers upon request. The evidence of coverage shall contain all information that a prudent buyer would need to be aware of in making selections of benefit plan designs. An entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare an evidence of coverage for that health benefit plan.
(3)Provide copies of the current summary brochure to all agents or brokers who represent the carrier and, upon updating the brochure, send copies of the updated brochure to agents and brokers representing the carrier for the purpose of selling health benefit plans.
(4)Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(e)Every agent or broker representing one or more carriers for the purpose of selling health benefit plans to small employers shall do all of the following:
(1)When providing information on a health benefit plan to a small employer but making no specific recommendations on particular benefit plan designs:
(A)Advise the small employer of the carriers obligation to sell to any small employer any of the health benefit plans it offers to small employers, consistent with PPACA, and provide them, upon request, with the actual rates that would be charged to that employer for a given health benefit plan.
(B)Notify the small employer that the agent or broker will procure rate and benefit information for the small employer on any health benefit plan offered by a carrier for whom the agent or broker sells health benefit plans.
(C)Notify the small employer that, upon request, the agent or broker will provide the small employer with the summary brochure required in paragraph (1) of subdivision (d) for any benefit plan design offered by a carrier whom the agent or broker represents.
(D)Notify the small employer of the availability of coverage and the availability of tax credits for certain employers consistent with PPACA and state law, including any rules, regulations, or guidance issued in connection therewith.
(2)When recommending a particular benefit plan design or designs, advise the small employer that, upon request, the agent will provide the small employer with the brochure required by paragraph (1) of subdivision (d) containing the benefit plan design or designs being recommended by the agent or broker.
(3)Prior to filing an application for a small employer for a particular health benefit plan:
(A)For each of the health benefit plans offered by the carrier whose health benefit plan the agent or broker is presenting, provide the small employer with the benefit summary required in paragraph (1) of subdivision (d) and the premium for that particular employer.
(B)Notify the small employer that, upon request, the agent or broker will provide the small employer with an evidence of coverage brochure for each health benefit plan the carrier offers.
(C)Obtain a signed statement from the small employer acknowledging that the small employer has received the disclosures required by this paragraph and Section 10753.16.
(f)A carrier, agent, or broker shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health benefit plan which, in the case of an eligible employee meeting the definition in paragraph (1) of subdivision (f) of Section 10753, is provided in connection with the employees employment or which, in the case of an eligible employee as defined in paragraph (2) of subdivision (f) of Section 10753, is provided in connection with a guaranteed association.
(g)A carrier shall not reject an application from a small employer for a health benefit plan provided:
(1)The small employer as defined by subparagraph (A) of paragraph (1) of subdivision (q) of Section 10753 offers health benefits to 100 percent of its eligible employees as defined in paragraph (1) of subdivision (f) of Section 10753. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(h)(1)A carrier or agent or broker shall not, directly or indirectly, engage in the following activities:
(A)Encourage or direct small employers to refrain from filing an application for coverage with a carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(B)Encourage or direct small employers to seek coverage from another carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(C)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on the individuals 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.
(2)This subdivision shall be enforced in the same manner as Section 790.03, including through Sections 790.035 and 790.05.
(i)A carrier shall not, directly or indirectly, enter into any contract, agreement, or arrangement with an agent or broker that provides for or results in the compensation paid to an agent or broker for a health benefit plan to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer or the small employers employees. This subdivision shall not apply with respect to a compensation arrangement that provides compensation to an agent or broker on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(j)(1)A health benefit plan offered to a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 10753, shall 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:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 10291.5, a carrier shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a health benefit plan. A carrier shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(k)(1)A carrier shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all insureds in all nongrandfathered small employer health benefit plans offered by the carrier in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the carrier outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a carrier shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 10112.27, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A carrier may vary premium rates for a particular nongrandfathered health benefit plan from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the health benefit plan.
(B)The health benefit plans provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the health benefit plan that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for health benefit plans that offer those benefits in addition to essential health benefits.
(D)Administrative costs, excluding any user fees required by the Exchange.
(E)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(l)If a carrier enters into a contract, agreement, or other arrangement with a third-party administrator or other entity to provide administrative, marketing, or other services related to the offering of health benefit plans to small employers in this state, the third-party administrator shall be subject to this chapter.
(m)This section shall become operative on January 1, 2030.
SEC. 5.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)(1)Each plan shall fairly and affirmatively offer, market, and sell all of the plans small employer health care service plan contracts to all small employers in each service area in which the plan provides or arranges for the provision of health care services.
(2)Each plan shall make available to each small employer all small employer health care service plan contracts that the plan offers and sells to small employers or to associations that include small employers in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health coverage.
(B)(i)Notwithstanding subparagraphs (A) and (C), an association of employers may offer a large group health care service plan contract consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(III)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health care service plan contract in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)As of January 1, 2019, the large group health care service plan contract offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 1367.008, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health care service plan contract provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations adopted pursuant to that section.
(V)The large group health care service plan contract includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health care service plan contract in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(VI)The large group health care service plan contract offers only fully insured benefits through a health care service plan licensed by the department or a health insurance policy with a disability insurer that is licensed by the Department of Insurance. The benefits offered under the large group health care service plan contract shall be considered fully insured only if the terms of the health care service plan contract provide for benefits, the amount of all of which the department determines are guaranteed under a health care service plan contract issued by a health care service plan licensed by the department.
(VII)The number of total employees, including employees described in subclause (V), employed by all participating employers in each year is at least 101 employees.
(VIII)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(IX)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(X)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health care service plan contract, in form and in substance.
(XI)The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health care service plan contract based on health status or claims of any employee or dependent.
(XII)The MEWA files an application for registration with the department on or before June 1, 2022.
(ia)A MEWA that timely registers with the department and that is found to be in compliance with this clause shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), a MEWA that does not meet the requirements of sub-subclause (ia) shall be subject to the restrictions provided in subparagraph (A).
(ii)(I)On or after June 1, 2022, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in clause (i) or unless the MEWA filed an application for registration pursuant to clause (i) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in clause (i).
(II)The department may issue guidance to health care service plans and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(C)(i)Notwithstanding subparagraphs (A) and (B), an association of employers may offer a large group health care service plan contract to small group employer members of the association, consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state, was established prior to March 23, 2010, has been in continuous existence since that date, and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA (29 U.S.C. Sec. 1002(5)). The association is the sponsor of a multiple employer welfare arrangement (MEWA), as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144), is headquartered in California, and is in full compliance with all applicable state and federal laws.
(III)The MEWA has offered a large group health care service plan since January 1, 2012, in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)The large group health care service plan offers to employees a level of coverage having an actuarial value or equivalent to, or greater than, the platinum level of coverage pursuant to Section 1367.009 available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code and provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations pursuant to that section.
(V)The large group health care service plan includes coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California.
(VI)The large group health care service plan offers only fully insured benefits through an insurance contract with a health care service plan licensed by the Department of Managed Health Care.
(VII)Association members purchasing health coverage have a minimum of four full-time common law employees and are current employer members of the association sponsoring the MEWA. Employer members of the association subsidize employee premiums by at least 51 percent.
(VIII)The association is an organization with business and organizational purposes unrelated to the provision of health care benefits and existed prior to the establishment of the MEWA offering the employee welfare benefit plan.
(IX)The participating member employers have a commonality of interests from being in the same industry, unrelated to the provision of health care benefits.
(X)Membership in the association is open solely to employers, and the participating member employers, either directly or indirectly, exercise control over the employee welfare benefit plan, the MEWA, and the large group health care service plan contract, both in form and substance.
(XI)The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issued and renewable for member employers, as well as their employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health status or claims of any person. An employer otherwise eligible is not excluded from participating in a MEWA, or offering or renewing the large group health care service plan contract based on health status or claims of any employee or dependent.
(XII)The MEWA at all times covers at least 101 employees.
(XIII)The association and the MEWA file applications for registration with the department on or before June 1, 2022.
(ia)An association and MEWA that timely register with the department prior to June 1, 2022, and that are found to be in compliance with this clause, shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), an association and MEWA that do not meet the requirements of sub-subclause (ia) shall be subject to the restrictions provided in subparagraph (A).
(ic)An association and MEWA that have registered with the department and fail to show ongoing compliance in their annual filing shall be subject to the restrictions in subparagraph (A).
(id)On or before June 30, 2032, 2026, the department shall provide the health policy committees of the Legislature the most recent filings made pursuant to sub-subclause (ia) and shall provide a recommendation to the Legislature as to whether any MEWAs that have registered with the department pursuant to this subclause should cease to be operative or whether they should remain operative based on compliance with this clause. (ia).
(ie)The filings and recommendations to be submitted pursuant to sub-subclause (id) shall be submitted in compliance with Section 9795 of the Government Code.
(ii)(I)On or after June 1, 2022, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care service plan coverage to any association or MEWA that provides any benefit to a resident in this state unless the association and MEWA have registered with the department and are found to be in compliance with the requirements set forth in clause (i), or unless the association and MEWA filed applications for registration pursuant to clause (i) and the applications are pending before the department. The department shall have the authority to determine compliance with the requirements set forth in clause (i).
(II)The department may issue guidance to health care service plans, associations, and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement subject to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(iii)(I)The department shall conduct an analysis of the impacts on the small employer health insurance market in California of health care service plans currently issuing large group contracts to small employers through MEWAs. The department shall post a report summarizing its analysis on its internet website by July 1, 2026.
(II)The purpose of the analysis is to determine the extent to which coverage of Californians in existing MEWAs has any detrimental impact on the affordability and access to small group health insurance for small businesses in California who do not purchase health insurance through a MEWA.
(III)The department may coordinate with the Department of Insurance.
(IV)Health care service plans and MEWAs shall comply with requests for information from the department to complete this analysis.
(V)The department may contract with a consultant or consultants with expertise to assist the department in its analysis. Contracts entered into pursuant to the authority in this subclause shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Article 4 (commencing with Section 19130) of Chapter 5 of Part 2 of Division 5 of Title 2 of the Government Code, and the State Contract Act (Chapter 1 (commencing with Section 10100) of Part 2 of Division 2 of the Public Contract Code).
(3)A plan that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraphs (1) and (2) with respect to small employer health care service plan contracts offered through the Exchange in those geographic regions in which the plan offers plan contracts through the Exchange.
(b)A plan shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Each plan shall provide special enrollment periods consistent with the special enrollment periods described in Section 1399.849, to the extent permitted by PPACA, except for both of the following:
(1)The special enrollment period described in paragraph (3) of subdivision (c) of Section 1399.849.
(2)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to plan contracts offered through the Exchange.
(c)A plan or solicitor shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health care service plan contract that is provided in connection with the employees employment or membership in a guaranteed association.
(d)Every plan shall file with the director the reasonable employee participation requirements and employer contribution requirements that will be applied in offering its plan contracts. Participation requirements shall be applied uniformly among all small employer groups, except that a plan may vary application of minimum employee participation requirements by the size of the small employer group and whether the employer contributes 100 percent of the eligible employees premium. Employer contribution requirements shall not vary by employer size. A health care service plan shall not establish a participation requirement that (1) requires a person who meets the definition of a dependent in Section 1357.500 to enroll as a dependent if the person is otherwise eligible for coverage and wishes to enroll as an eligible employee and (2) allows a plan to reject an otherwise eligible small employer because of the number of persons that waive coverage due to coverage through another employer. Members of an association eligible for health coverage under subdivision (m) of Section 1357.500, but not electing any health coverage through the association, shall not be counted as eligible employees for purposes of determining whether the guaranteed association meets a plans reasonable participation standards.
(e)The plan shall not reject an application from a small employer for a small employer health care service plan contract if all of the following conditions are met:
(1)The small employer offers health benefits to 100 percent of its eligible employees. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(3)The small employer agrees to inform the small employers employees of the availability of coverage and the provision that those not electing coverage must wait until the next open enrollment or a special enrollment period to obtain coverage through the group if they later decide they would like to have coverage.
(4)The employees and their dependents who are to be covered by the plan contract work or reside in the service area in which the plan provides or otherwise arranges for the provision of health care services.
(f)A plan or solicitor shall not, directly or indirectly, engage in the following activities:
(1)Encourage or direct small employers to refrain from filing an application for coverage with a plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(2)Encourage or direct small employers to seek coverage from another plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(3)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on an individuals 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.
(g)A plan shall not, directly or indirectly, enter into any contract, agreement, or arrangement with a solicitor that provides for or results in the compensation paid to a solicitor for the sale of a health care service plan contract to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer. This subdivision does not apply to a compensation arrangement that provides compensation to a solicitor on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(h)(1)A policy or contract that covers a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 1357.500, shall not establish rules for eligibility, including continued eligibility, of an individual, or dependent of an individual, to enroll under the terms of the policy or contract based on any of the following health status-related factors:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 1389.1, a health care service plan shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a small employer health care service plan contract. A health care service plan shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(i)(1)A health care service plan shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all enrollees in all nongrandfathered small employer health benefit plans offered by the health care service plan in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the health care service plan outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a health care service plan shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 1367.005, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered small employer health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A health care service plan may vary premium rates for a particular nongrandfathered small employer health care service plan contract from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the plan contract.
(B)The plan contracts provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the plan contract that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for plan contracts that offer those benefits in addition to essential health benefits.
(D)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(E)Administrative costs, excluding any user fees required by the Exchange.
(j)A plan shall comply with the requirements of Section 1374.3.
(k)This section shall remain in effect only until January 1, 2033, 2030, and as of that date is repealed.
SEC. 2.Section 1357.503 of the Health and Safety Code, as added by Section 2.3 of Chapter 736 of the Statutes of 2021, is amended to read:1357.503.(a)(1)Each plan shall fairly and affirmatively offer, market, and sell all of the plans small employer health care service plan contracts to all small employers in each service area in which the plan provides or arranges for the provision of health care services.
(2)Each plan shall make available to each small employer all small employer health care service plan contracts that the plan offers and sells to small employers or to associations that include small employers in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health coverage.
(B)Notwithstanding subparagraph (A), an association of employers may offer a large group health care service plan contract consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(i)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(ii)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(iii)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health care service plan contract in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(iv)As of January 1, 2019, the large group health care service plan contract offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 1367.008, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health care service plan contract provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations adopted pursuant to that section.
(v)The large group health care service plan contract includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health care service plan contract in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(vi)The large group health care service plan contract offers only fully insured benefits through a health care service plan licensed by the department or a health insurance policy with a disability insurer that is licensed by the Department of Insurance. The benefits offered under the large group health care service plan contract shall be considered fully insured only if the terms of the health care service plan contract provide for benefits, the amount of all of which the department determines are guaranteed under a health care service plan contract issued by a health care service plan licensed by the department.
(vii)The number of total employees, including employees described in clause (v), employed by all participating employers in each year is at least 101 employees.
(viii)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(ix)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(x)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health care service plan contract, in form and in substance.
(xi)The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health care service plan contract based on health status or claims of any employee or dependent.
(xii)The MEWA files an application for registration with the department on or before June 1, 2022.
(I)A MEWA that timely registers with the department and that is found to be in compliance with this subparagraph shall annually file evidence of ongoing compliance with this subparagraph with the department, in a form and manner set forth by the department.
(II)Except as provided in clause (iii) of subparagraph (C), a MEWA that does not meet the requirements of subclause (I) shall be subject to the restrictions provided in subparagraph (A).
(C)(i)On or after June 1, 2022, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in subparagraph (B) or unless the MEWA filed an application for registration pursuant to subparagraph (B) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in subparagraph (B).
(ii)The department may issue guidance to health care service plans and MEWAs regarding registration and compliance with subparagraph (B). The 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).
(iii)Subparagraph (B) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(3)A plan that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraphs (1) and (2) with respect to small employer health care service plan contracts offered through the Exchange in those geographic regions in which the plan offers plan contracts through the Exchange.
(b)A plan shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Each plan shall provide special enrollment periods consistent with the special enrollment periods described in Section 1399.849, to the extent permitted by PPACA, except for both of the following:
(1)The special enrollment period described in paragraph (3) of subdivision (c) of Section 1399.849.
(2)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to plan contracts offered through the Exchange.
(c)A plan or solicitor shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health care service plan contract that is provided in connection with the employees employment or membership in a guaranteed association.
(d)Every plan shall file with the director the reasonable employee participation requirements and employer contribution requirements that will be applied in offering its plan contracts. Participation requirements shall be applied uniformly among all small employer groups, except that a plan may vary application of minimum employee participation requirements by the size of the small employer group and whether the employer contributes 100 percent of the eligible employees premium. Employer contribution requirements shall not vary by employer size. A health care service plan shall not establish a participation requirement that (1) requires a person who meets the definition of a dependent in Section 1357.500 to enroll as a dependent if the person is otherwise eligible for coverage and wishes to enroll as an eligible employee and (2) allows a plan to reject an otherwise eligible small employer because of the number of persons that waive coverage due to coverage through another employer. Members of an association eligible for health coverage under subdivision (m) of Section 1357.500, but not electing any health coverage through the association, shall not be counted as eligible employees for purposes of determining whether the guaranteed association meets a plans reasonable participation standards.
(e)The plan shall not reject an application from a small employer for a small employer health care service plan contract if all of the following conditions are met:
(1)The small employer offers health benefits to 100 percent of its eligible employees. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(3)The small employer agrees to inform the small employers employees of the availability of coverage and the provision that those not electing coverage must wait until the next open enrollment or a special enrollment period to obtain coverage through the group if they later decide they would like to have coverage.
(4)The employees and their dependents who are to be covered by the plan contract work or reside in the service area in which the plan provides or otherwise arranges for the provision of health care services.
(f)A plan or solicitor shall not, directly or indirectly, engage in the following activities:
(1)Encourage or direct small employers to refrain from filing an application for coverage with a plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(2)Encourage or direct small employers to seek coverage from another plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(3)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on an individuals 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.
(g)A plan shall not, directly or indirectly, enter into any contract, agreement, or arrangement with a solicitor that provides for or results in the compensation paid to a solicitor for the sale of a health care service plan contract to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer. This subdivision does not apply to a compensation arrangement that provides compensation to a solicitor on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(h)(1)A policy or contract that covers a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 1357.500, shall not establish rules for eligibility, including continued eligibility, of an individual, or dependent of an individual, to enroll under the terms of the policy or contract based on any of the following health status-related factors:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 1389.1, a health care service plan shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a small employer health care service plan contract. A health care service plan shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(i)(1)A health care service plan shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all enrollees in all nongrandfathered small employer health benefit plans offered by the health care service plan in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the health care service plan outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a health care service plan shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 1367.005, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered small employer health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A health care service plan may vary premium rates for a particular nongrandfathered small employer health care service plan contract from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the plan contract.
(B)The plan contracts provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the plan contract that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for plan contracts that offer those benefits in addition to essential health benefits.
(D)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(E)Administrative costs, excluding any user fees required by the Exchange.
(j)A plan shall comply with the requirements of Section 1374.3.
(k)This section shall become operative on January 1, 2033. 2030.
SEC. 3.Section 10753.05 of the Insurance Code, as amended by Section 9.3 of Chapter 764 of the Statutes of 2021, is amended to read:10753.05.(a)A group or individual policy or contract or certificate of group insurance or statement of group coverage providing benefits to employees of small employers as defined in this chapter shall not be issued or delivered by a carrier subject to the jurisdiction of the commissioner regardless of the situs of the contract or master policyholder or of the domicile of the carrier nor, except as otherwise provided in Sections 10270.91 and 10270.92, shall a carrier provide coverage subject to this chapter until a copy of the form of the policy, contract, certificate, or statement of coverage is filed with and approved by the commissioner in accordance with Sections 10290 and 10291, and the carrier has complied with the requirements of Section 10753.17.
(b)(1)Each carrier shall fairly and affirmatively offer, market, and sell all of the carriers health benefit plans that are sold to, offered through, or sponsored by, small employers or associations that include small employers for plan years on or after January 1, 2014, to all small employers in each geographic region in which the carrier makes coverage available or provides benefits.
(2)A carrier that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraph (1) with respect to health benefit plans offered through the Exchange in those geographic regions in which the carrier offers plans through the Exchange.
(3)A carrier shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Commencing January 1, 2014, a carrier shall provide special enrollment periods consistent with the special enrollment periods described in Section 10965.3, to the extent permitted by PPACA, except for both of the following:
(A)The special enrollment period described in paragraph (3) of subdivision (c) of Section 10965.3.
(B)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to health benefit plans offered through the Exchange.
(4)This section does not require an association, or a trust established and maintained by an association to receive a master insurance policy issued by an admitted insurer and to administer the benefits thereof solely for association members, to offer, market, or sell a benefit plan design to those who are not members of the association. However, if the association markets, offers, or sells a benefit plan design to those who are not members of the association it is subject to the requirements of this section. This section applies to an association that otherwise meets the requirements of paragraph (8) formed by merger of two or more associations after January 1, 1992, if the predecessor organizations had been in active existence on January 1, 1992, and for at least five years prior to that date and met the requirements of paragraph (5).
(5)A carrier which (A) effective January 1, 1992, and at least 20 years prior to that date, markets, offers, or sells benefit plan designs only to all members of one association and (B) does not market, offer, or sell any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits shall not be required to market, offer, or sell to those who are not members of the association. However, if the carrier markets, offers, or sells any benefit plan design or any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits to those who are not members of the association it is subject to the requirements of this section.
(6)Each carrier that sells health benefit plans to members of one association pursuant to paragraph (5) shall submit an annual statement to the commissioner which states that the carrier is selling health benefit plans pursuant to paragraph (5) and which, for the one association, lists all the information required by paragraph (7).
(7)Each carrier that sells health benefit plans to members of any association shall submit an annual statement to the commissioner which lists each association to which the carrier sells health benefit plans, the industry or profession which is served by the association, the associations membership criteria, a list of officers, the state in which the association is organized, and the site of its principal office.
(8)For purposes of paragraphs (4) and (6), an association is a nonprofit organization composed of a group of individuals or employers who associate based solely on participation in a specified profession or industry, accepting for membership any individual or small employer meeting its membership criteria, which do not condition membership directly or indirectly on the health or claims history of any person, which uses membership dues solely for and in consideration of the membership and membership benefits, except that the amount of the dues shall not depend on whether the member applies for or purchases insurance offered by the association, which is organized and maintained in good faith for purposes unrelated to insurance, which has been in active existence on January 1, 1992, and at least five years prior to that date, which has a constitution and bylaws, or other analogous governing documents that provide for election of the governing board of the association by its members, which has contracted with one or more carriers to offer one or more health benefit plans to all individual members and small employer members in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health insurance coverage.
(B)(i)Notwithstanding subparagraphs (A) and (C), an association of employers may offer a large group health insurance policy consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(III)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health insurance policy in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)As of January 1, 2019, the large group health insurance policy offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 10112.295, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health insurance policy provides coverage for essential health benefits consistent with Section 10112.27 and any rules or regulations adopted pursuant to that section.
(V)The large group health insurance policy includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health insurance policy in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(VI)The large group health insurance policy offers only fully insured benefits through a health insurer or disability insurer licensed by the department. The benefits offered under the large group health insurance policy shall be considered fully insured only if the terms of the health insurance policy provide for benefits, the amount of all of which the department determines are guaranteed under a policy of insurance issued by an insurer licensed by the department.
(VII)The number of total employees, including employees described in subclause (V), employed by all participating employers in each year is at least 101 employees.
(VIII)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(IX)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(X)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health insurance policy, in form and in substance.
(XI)The large group health insurance policy is treated as a single-risk-rated policy that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health insurance policy based on health status or claims of any employee or dependent.
(XII)The MEWA files an application for registration with the department on or before June 1, 2022.
(ia)A MEWA that timely registers with the department and that is found to be in compliance with this clause shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), a MEWA that does not meet the requirements of sub-subclause (ia) shall be subject to the restrictions provided in subparagraph (A).
(ii)(I)On or after June 1, 2022, a health insurer shall not market, issue, amend, renew, or deliver large employer health insurance coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in clause (i) or unless the MEWA filed an application for registration pursuant to clause (i) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in clause (i).
(II)The department may issue guidance to health insurers and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1.
(C)(i)Notwithstanding subparagraphs (A) and (B), an association of employers may offer a large group health insurance policy to small group employer members of the association, consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state, was established prior to March 23, 2010, has been in continuous existence since that date, and is a bona fide association or group of employers under ERISA that may act as an employer under Section 3(5) of ERISA (29 U.S.C. Sec. 1002(5)). The association is the sponsor of a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144), is headquartered in California, and is in full compliance with all applicable state and federal laws.
(III)The MEWA has offered a large group health insurance policy since January 1, 2012, in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)The large group health insurance policy offers to employees a level of coverage having an actuarial value or equivalent to, or greater than, the platinum level of coverage pursuant to Section 10112.297 available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and provides coverage for essential health benefits consistent with Section 10112.27 and Article 22 (commencing with Section 2594) of Subchapter 3 of Chapter 5 of Title 10 of the California Code of Regulations.
(V)The large group health insurance policy includes coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California.
(VI)The large group health insurance policy offers only fully insured benefits through a health insurance policy with a health insurer that is licensed by the department.
(VII)The association members purchasing health coverage have a minimum of four full-time common law employees and are current employer members of the association sponsoring the MEWA. Employer members of the association subsidize employee premium by at least 51 percent.
(VIII)The association is an organization with business and organizational purposes unrelated to the provision of health care benefits and existed prior to the establishment of the MEWA offering the employee welfare benefit plan.
(IX)The participating member employers have a commonality of interests from being in the same industry, unrelated to the provision of health care benefits.
(X)Membership in the association is open solely to employers, and the participating member employers, either directly or indirectly, exercise control over the employee welfare benefit plan, the MEWA, and the large group health insurance policy, both in form and substance.
(XI)The large group health insurance policy is treated as a single-risk-rated contract that is guaranteed issued and renewable for member employers, as well as their employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health status or claims of any person. An employer otherwise eligible for coverage is not excluded from participating in a MEWA, or offering or renewing the large group health insurance policy based on health status or claims of any employee or dependent.
(XII)The MEWA at all times covers at least 101 employees.
(XIII)The association and the MEWA file applications for registration with the department on or before June 1, 2022.
(ia)An association and the MEWA that timely register with the department prior to June 1, 2022, and that are found to be in compliance with this clause, shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), an association and MEWA that do not meet the requirements of sub-subclause (ia) shall be subject to the restrictions in subparagraph (A).
(ic)An association and MEWA that have registered with the department and fail to show ongoing compliance in its annual filing shall be subject to the restrictions in subparagraph (A).
(id)On or before June 30, 2032, 2026, the department shall provide the health policy committees of the Legislature the most recent filings made pursuant to sub-subclause (ia) and shall provide a recommendation to the Legislature as to whether any MEWAs that have registered with the department pursuant to this subclause should cease to be operative or whether they should remain operative based on compliance with this clause. (ia).
(ie)The filings and recommendations to be submitted pursuant to sub-subclause (id) shall be submitted in compliance with Section 9795 of the Government Code.
(ii)(I)On or after June 1, 2022, an insurer shall not market, issue, amend, renew, or deliver large employer health insurance coverage to any association or MEWA that provides any benefit to a resident in this state unless the association and MEWA have registered with the department and are found to be in compliance with the requirements set forth in clause (i), or unless the association and MEWA filed applications for registration pursuant to clause (xiii) of clause (i) and the applications are pending before the department. The department shall have the authority to determine compliance with the requirements set forth under clause (i).
(II)The department may issue guidance to health insurers, associations, and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement subject to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1.
(iii)(I)The department shall conduct an analysis of the impacts on the small employer health insurance market in California of health insurers currently issuing large group policies to small employers through MEWAs. The department shall post a report summarizing its analysis on its internet website by July 1, 2026.
(II)The purpose of the analysis is to determine the extent to which coverage of Californians in existing MEWAs has any detrimental impact on the affordability and access to small group health insurance for small businesses in California who do not purchase health insurance through a MEWA.
(III)The department may coordinate with the Department of Managed Health Care.
(IV)Health insurers and MEWAs shall comply with requests for information from the department to complete this analysis.
(V)The department may contract with a consultant or consultants with expertise to assist the department in its analysis. Contracts entered into pursuant to the authority in this subclause shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Article 4 (commencing with Section 19130) of Chapter 5 of Part 2 of Division 5 of Title 2 of the Government Code, and the State Contract Act (Chapter 1 (commencing with Section 10100) of Part 2 of Division 2 of the Public Contract Code).
(c)Each carrier shall make available to each small employer all health benefit plans that the carrier offers or sells to small employers or to associations that include small employers for plan years on or after January 1, 2014. Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(d)Each carrier shall do all of the following:
(1)Prepare a brochure that summarizes all of its health benefit plans and make this summary available to small employers, agents, and brokers upon request. The summary shall include for each plan information on benefits provided, a generic description of the manner in which services are provided, such as how access to providers is limited, benefit limitations, required copayments and deductibles, and a telephone number that can be called for more detailed benefit information. Carriers are required to keep the information contained in the brochure accurate and up to date, and, upon updating the brochure, send copies to agents and brokers representing the carrier. Any entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare a summary brochure which includes that benefit plan.
(2)For each health benefit plan, prepare a more detailed evidence of coverage and make it available to small employers, agents, and brokers upon request. The evidence of coverage shall contain all information that a prudent buyer would need to be aware of in making selections of benefit plan designs. An entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare an evidence of coverage for that health benefit plan.
(3)Provide copies of the current summary brochure to all agents or brokers who represent the carrier and, upon updating the brochure, send copies of the updated brochure to agents and brokers representing the carrier for the purpose of selling health benefit plans.
(4)Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(e)Every agent or broker representing one or more carriers for the purpose of selling health benefit plans to small employers shall do all of the following:
(1)When providing information on a health benefit plan to a small employer but making no specific recommendations on particular benefit plan designs:
(A)Advise the small employer of the carriers obligation to sell to any small employer any of the health benefit plans it offers to small employers, consistent with PPACA, and provide them, upon request, with the actual rates that would be charged to that employer for a given health benefit plan.
(B)Notify the small employer that the agent or broker will procure rate and benefit information for the small employer on any health benefit plan offered by a carrier for whom the agent or broker sells health benefit plans.
(C)Notify the small employer that, upon request, the agent or broker will provide the small employer with the summary brochure required in paragraph (1) of subdivision (d) for any benefit plan design offered by a carrier whom the agent or broker represents.
(D)Notify the small employer of the availability of coverage and the availability of tax credits for certain employers consistent with PPACA and state law, including any rules, regulations, or guidance issued in connection therewith.
(2)When recommending a particular benefit plan design or designs, advise the small employer that, upon request, the agent will provide the small employer with the brochure required by paragraph (1) of subdivision (d) containing the benefit plan design or designs being recommended by the agent or broker.
(3)Prior to filing an application for a small employer for a particular health benefit plan:
(A)For each of the health benefit plans offered by the carrier whose health benefit plan the agent or broker is presenting, provide the small employer with the benefit summary required in paragraph (1) of subdivision (d) and the premium for that particular employer.
(B)Notify the small employer that, upon request, the agent or broker will provide the small employer with an evidence of coverage brochure for each health benefit plan the carrier offers.
(C)Obtain a signed statement from the small employer acknowledging that the small employer has received the disclosures required by this paragraph and Section 10753.16.
(f)A carrier, agent, or broker shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health benefit plan which, in the case of an eligible employee meeting the definition in paragraph (1) of subdivision (f) of Section 10753, is provided in connection with the employees employment or which, in the case of an eligible employee as defined in paragraph (2) of subdivision (f) of Section 10753, is provided in connection with a guaranteed association.
(g)A carrier shall not reject an application from a small employer for a health benefit plan provided:
(1)The small employer as defined by subparagraph (A) of paragraph (1) of subdivision (q) of Section 10753 offers health benefits to 100 percent of its eligible employees as defined in paragraph (1) of subdivision (f) of Section 10753. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(h)(1)A carrier or agent or broker shall not, directly or indirectly, engage in the following activities:
(A)Encourage or direct small employers to refrain from filing an application for coverage with a carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(B)Encourage or direct small employers to seek coverage from another carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(C)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on the individuals 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.
(2)This subdivision shall be enforced in the same manner as Section 790.03, including through Sections 790.035 and 790.05.
(i)A carrier shall not, directly or indirectly, enter into any contract, agreement, or arrangement with an agent or broker that provides for or results in the compensation paid to an agent or broker for a health benefit plan to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer or the small employers employees. This subdivision shall not apply with respect to a compensation arrangement that provides compensation to an agent or broker on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(j)(1)A health benefit plan offered to a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 10753, shall 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:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 10291.5, a carrier shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a health benefit plan. A carrier shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(k)(1)A carrier shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all insureds in all nongrandfathered small employer health benefit plans offered by the carrier in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the carrier outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a carrier shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 10112.27, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A carrier may vary premium rates for a particular nongrandfathered health benefit plan from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the health benefit plan.
(B)The health benefit plans provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the health benefit plan that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for health benefit plans that offer those benefits in addition to essential health benefits.
(D)Administrative costs, excluding any user fees required by the Exchange.
(E)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(l)If a carrier enters into a contract, agreement, or other arrangement with a third-party administrator or other entity to provide administrative, marketing, or other services related to the offering of health benefit plans to small employers in this state, the third-party administrator shall be subject to this chapter.
(m)This section shall remain in effect only until January 1, 2033, 2030, and as of that date is repealed.
SEC. 4.Section 10753.05 of the Insurance Code, as added by Section 4.3 of Chapter 736 of the Statutes of 2021, is amended to read:10753.05.(a)A group or individual policy or contract or certificate of group insurance or statement of group coverage providing benefits to employees of small employers as defined in this chapter shall not be issued or delivered by a carrier subject to the jurisdiction of the commissioner regardless of the situs of the contract or master policyholder or of the domicile of the carrier nor, except as otherwise provided in Sections 10270.91 and 10270.92, shall a carrier provide coverage subject to this chapter until a copy of the form of the policy, contract, certificate, or statement of coverage is filed with and approved by the commissioner in accordance with Sections 10290 and 10291, and the carrier has complied with the requirements of Section 10753.17.
(b)(1)Each carrier shall fairly and affirmatively offer, market, and sell all of the carriers health benefit plans that are sold to, offered through, or sponsored by, small employers or associations that include small employers for plan years on or after January 1, 2014, to all small employers in each geographic region in which the carrier makes coverage available or provides benefits.
(2)A carrier that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraph (1) with respect to health benefit plans offered through the Exchange in those geographic regions in which the carrier offers plans through the Exchange.
(3)A carrier shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Commencing January 1, 2014, a carrier shall provide special enrollment periods consistent with the special enrollment periods described in Section 10965.3, to the extent permitted by PPACA, except for both of the following:
(A)The special enrollment period described in paragraph (3) of subdivision (c) of Section 10965.3.
(B)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to health benefit plans offered through the Exchange.
(4)This section does not require an association, or a trust established and maintained by an association to receive a master insurance policy issued by an admitted insurer and to administer the benefits thereof solely for association members, to offer, market, or sell a benefit plan design to those who are not members of the association. However, if the association markets, offers, or sells a benefit plan design to those who are not members of the association, it is subject to the requirements of this section. This section applies to an association that otherwise meets the requirements of paragraph (8) formed by merger of two or more associations after January 1, 1992, if the predecessor organizations had been in active existence on January 1, 1992, and for at least five years prior to that date and met the requirements of paragraph (5).
(5)A carrier which (A) effective January 1, 1992, and at least 20 years that date, markets, offers, or sells benefit plan designs only to all members of one association and (B) does not market, offer, or sell any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits shall not be required to market, offer, or sell to those who are not members of the association. However, if the carrier markets, offers, or sells any benefit plan design or any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits to those who are not members of the association, it is subject to the requirements of this section.
(6)Each carrier that sells health benefit plans to members of one association pursuant to paragraph (5) shall submit an annual statement to the commissioner which states that the carrier is selling health benefit plans pursuant to paragraph (5) and which, for the one association, lists all the information required by paragraph (7).
(7)Each carrier that sells health benefit plans to members of any association shall submit an annual statement to the commissioner which lists each association to which the carrier sells health benefit plans, the industry or profession which is served by the association, the associations membership criteria, a list of officers, the state in which the association is organized, and the site of its principal office.
(8)For purposes of paragraphs (4) and (6), an association is a nonprofit organization composed of a group of individuals or employers who associate based solely on participation in a specified profession or industry, accepting for membership any individual or small employer meeting its membership criteria, which do not condition membership directly or indirectly on the health or claims history of any person, which uses membership dues solely for and in consideration of the membership and membership benefits, except that the amount of the dues shall not depend on whether the member applies for or purchases insurance offered by the association, which is organized and maintained in good faith for purposes unrelated to insurance, which has been in active existence on January 1, 1992, and at least five years before that date, which has a constitution and bylaws, or other analogous governing documents that provide for election of the governing board of the association by its members, which has contracted with one or more carriers to offer one or more health benefit plans to all individual members and small employer members in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health insurance coverage.
(B)Notwithstanding subparagraph (A), an association of employers may offer a large group health insurance policy consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(i)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(ii)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(iii)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health insurance policy in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(iv)As of January 1, 2019, the large group health insurance policy offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 10112.295, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health insurance policy provides coverage for essential health benefits consistent with Section 10112.27 and any rules or regulations adopted pursuant to that section.
(v)The large group health insurance policy includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health insurance policy in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(vi)The large group health insurance policy offers only fully insured benefits through a health insurer or disability insurer licensed by the department. The benefits offered under the large group health insurance policy shall be considered fully insured only if the terms of the health insurance policy provide for benefits, the amount of all of which the department determines are guaranteed under a policy of insurance issued by an insurer licensed by the department.
(vii)The number of total employees, including employees described in clause (v), employed by all participating employers in each year is at least 101 employees.
(viii)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(ix)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(x)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health insurance policy, in form and in substance.
(xi)The large group health insurance policy is treated as a single-risk-rated policy that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health insurance policy based on health status or claims of any employee or dependent.
(xii)The MEWA files an application for registration with the department on or before June 1, 2022.
(I)A MEWA that timely registers with the department and that is found to be in compliance with this subparagraph shall annually file evidence of ongoing compliance with this subparagraph with the department, in a form and manner set forth by the department.
(II)Except as provided in clause (iii) of subparagraph (C), a MEWA that does not meet the requirements of subclause (I) shall be subject to the restrictions provided in subparagraph (A).
(C)(i)On or after June 1, 2022, a health insurer shall not market, issue, amend, renew, or deliver large employer health insurance coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in subparagraph (B) or unless the MEWA filed an application for registration pursuant to subparagraph (B) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in subparagraph (B).
(ii)The department may issue guidance to health insurers and MEWAs regarding registration and compliance with subparagraph (B). The 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).
(iii)Subparagraph (B) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1.
(c)Each carrier shall make available to each small employer all health benefit plans that the carrier offers or sells to small employers or to associations that include small employers for plan years on or after January 1, 2014. Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(d)Each carrier shall do all of the following:
(1)Prepare a brochure that summarizes all of its health benefit plans and make this summary available to small employers, agents, and brokers upon request. The summary shall include for each plan information on benefits provided, a generic description of the manner in which services are provided, such as how access to providers is limited, benefit limitations, required copayments and deductibles, and a telephone number that can be called for more detailed benefit information. Carriers are required to keep the information contained in the brochure accurate and up to date, and, upon updating the brochure, send copies to agents and brokers representing the carrier. Any entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare a summary brochure which includes that benefit plan.
(2)For each health benefit plan, prepare a more detailed evidence of coverage and make it available to small employers, agents, and brokers upon request. The evidence of coverage shall contain all information that a prudent buyer would need to be aware of in making selections of benefit plan designs. An entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare an evidence of coverage for that health benefit plan.
(3)Provide copies of the current summary brochure to all agents or brokers who represent the carrier and, upon updating the brochure, send copies of the updated brochure to agents and brokers representing the carrier for the purpose of selling health benefit plans.
(4)Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(e)Every agent or broker representing one or more carriers for the purpose of selling health benefit plans to small employers shall do all of the following:
(1)When providing information on a health benefit plan to a small employer but making no specific recommendations on particular benefit plan designs:
(A)Advise the small employer of the carriers obligation to sell to any small employer any of the health benefit plans it offers to small employers, consistent with PPACA, and provide them, upon request, with the actual rates that would be charged to that employer for a given health benefit plan.
(B)Notify the small employer that the agent or broker will procure rate and benefit information for the small employer on any health benefit plan offered by a carrier for whom the agent or broker sells health benefit plans.
(C)Notify the small employer that, upon request, the agent or broker will provide the small employer with the summary brochure required in paragraph (1) of subdivision (d) for any benefit plan design offered by a carrier whom the agent or broker represents.
(D)Notify the small employer of the availability of coverage and the availability of tax credits for certain employers consistent with PPACA and state law, including any rules, regulations, or guidance issued in connection therewith.
(2)When recommending a particular benefit plan design or designs, advise the small employer that, upon request, the agent will provide the small employer with the brochure required by paragraph (1) of subdivision (d) containing the benefit plan design or designs being recommended by the agent or broker.
(3)Prior to filing an application for a small employer for a particular health benefit plan:
(A)For each of the health benefit plans offered by the carrier whose health benefit plan the agent or broker is presenting, provide the small employer with the benefit summary required in paragraph (1) of subdivision (d) and the premium for that particular employer.
(B)Notify the small employer that, upon request, the agent or broker will provide the small employer with an evidence of coverage brochure for each health benefit plan the carrier offers.
(C)Obtain a signed statement from the small employer acknowledging that the small employer has received the disclosures required by this paragraph and Section 10753.16.
(f)A carrier, agent, or broker shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health benefit plan which, in the case of an eligible employee meeting the definition in paragraph (1) of subdivision (f) of Section 10753, is provided in connection with the employees employment or which, in the case of an eligible employee as defined in paragraph (2) of subdivision (f) of Section 10753, is provided in connection with a guaranteed association.
(g)A carrier shall not reject an application from a small employer for a health benefit plan provided:
(1)The small employer as defined by subparagraph (A) of paragraph (1) of subdivision (q) of Section 10753 offers health benefits to 100 percent of its eligible employees as defined in paragraph (1) of subdivision (f) of Section 10753. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(h)(1)A carrier or agent or broker shall not, directly or indirectly, engage in the following activities:
(A)Encourage or direct small employers to refrain from filing an application for coverage with a carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(B)Encourage or direct small employers to seek coverage from another carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(C)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on the individuals 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.
(2)This subdivision shall be enforced in the same manner as Section 790.03, including through Sections 790.035 and 790.05.
(i)A carrier shall not, directly or indirectly, enter into any contract, agreement, or arrangement with an agent or broker that provides for or results in the compensation paid to an agent or broker for a health benefit plan to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer or the small employers employees. This subdivision shall not apply with respect to a compensation arrangement that provides compensation to an agent or broker on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(j)(1)A health benefit plan offered to a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 10753, shall 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:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 10291.5, a carrier shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a health benefit plan. A carrier shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(k)(1)A carrier shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all insureds in all nongrandfathered small employer health benefit plans offered by the carrier in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the carrier outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a carrier shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 10112.27, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A carrier may vary premium rates for a particular nongrandfathered health benefit plan from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the health benefit plan.
(B)The health benefit plans provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the health benefit plan that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for health benefit plans that offer those benefits in addition to essential health benefits.
(D)Administrative costs, excluding any user fees required by the Exchange.
(E)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(l)If a carrier enters into a contract, agreement, or other arrangement with a third-party administrator or other entity to provide administrative, marketing, or other services related to the offering of health benefit plans to small employers in this state, the third-party administrator shall be subject to this chapter.
(m)This section shall become operative on January 1, 2033. 2030.
SEC. 5.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)(1)Each plan shall fairly and affirmatively offer, market, and sell all of the plans small employer health care service plan contracts to all small employers in each service area in which the plan provides or arranges for the provision of health care services.
(2)Each plan shall make available to each small employer all small employer health care service plan contracts that the plan offers and sells to small employers or to associations that include small employers in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health coverage.
(B)(i)Notwithstanding subparagraphs (A) and (C), an association of employers may offer a large group health care service plan contract consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(III)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health care service plan contract in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)As of January 1, 2019, the large group health care service plan contract offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 1367.008, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health care service plan contract provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations adopted pursuant to that section.
(V)The large group health care service plan contract includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health care service plan contract in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(VI)The large group health care service plan contract offers only fully insured benefits through a health care service plan licensed by the department or a health insurance policy with a disability insurer that is licensed by the Department of Insurance. The benefits offered under the large group health care service plan contract shall be considered fully insured only if the terms of the health care service plan contract provide for benefits, the amount of all of which the department determines are guaranteed under a health care service plan contract issued by a health care service plan licensed by the department.
(VII)The number of total employees, including employees described in subclause (V), employed by all participating employers in each year is at least 101 employees.
(VIII)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(IX)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(X)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health care service plan contract, in form and in substance.
(XI)The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health care service plan contract based on health status or claims of any employee or dependent.
(XII)The MEWA files an application for registration with the department on or before June 1, 2022.
(ia)A MEWA that timely registers with the department and that is found to be in compliance with this clause shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), a MEWA that does not meet the requirements of sub-subclause (ia) shall be subject to the restrictions provided in subparagraph (A).
(ii)(I)On or after June 1, 2022, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in clause (i) or unless the MEWA filed an application for registration pursuant to clause (i) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in clause (i).
(II)The department may issue guidance to health care service plans and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(C)(i)Notwithstanding subparagraphs (A) and (B), an association of employers may offer a large group health care service plan contract to small group employer members of the association, consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state, was established prior to March 23, 2010, has been in continuous existence since that date, and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA (29 U.S.C. Sec. 1002(5)). The association is the sponsor of a multiple employer welfare arrangement (MEWA), as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144), is headquartered in California, and is in full compliance with all applicable state and federal laws.
(III)The MEWA has offered a large group health care service plan since January 1, 2012, in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)The large group health care service plan offers to employees a level of coverage having an actuarial value or equivalent to, or greater than, the platinum level of coverage pursuant to Section 1367.009 available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code and provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations pursuant to that section.
(V)The large group health care service plan includes coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California.
(VI)The large group health care service plan offers only fully insured benefits through an insurance contract with a health care service plan licensed by the Department of Managed Health Care.
(VII)Association members purchasing health coverage have a minimum of four full-time common law employees and are current employer members of the association sponsoring the MEWA. Employer members of the association subsidize employee premiums by at least 51 percent.
(VIII)The association is an organization with business and organizational purposes unrelated to the provision of health care benefits and existed prior to the establishment of the MEWA offering the employee welfare benefit plan.
(IX)The participating member employers have a commonality of interests from being in the same industry, unrelated to the provision of health care benefits.
(X)Membership in the association is open solely to employers, and the participating member employers, either directly or indirectly, exercise control over the employee welfare benefit plan, the MEWA, and the large group health care service plan contract, both in form and substance.
(XI)The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issued and renewable for member employers, as well as their employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health status or claims of any person. An employer otherwise eligible is not excluded from participating in a MEWA, or offering or renewing the large group health care service plan contract based on health status or claims of any employee or dependent.
(XII)The MEWA at all times covers at least 101 employees.
(XIII)The association and the MEWA file applications for registration with the department on or before June 1, 2022.
(ia)An association and MEWA that timely register with the department prior to June 1, 2022, and that are found to be in compliance with this clause, shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), an association and MEWA that do not meet the requirements of sub-subclause (ia) shall be subject to the restrictions provided in subparagraph (A).
(ic)An association and MEWA that have registered with the department and fail to show ongoing compliance in their annual filing shall be subject to the restrictions in subparagraph (A).
(id)On or before June 30, 2032, the department shall provide the health policy committees of the Legislature the most recent filings made pursuant to sub-subclause (ia) and shall provide a recommendation to the Legislature as to whether any MEWAs that have registered with the department pursuant to this subclause should cease to be operative or whether they should remain operative based on compliance with this clause.
(ie)The filings and recommendations to be submitted pursuant to sub-subclause (id) shall be submitted in compliance with Section 9795 of the Government Code.
(ii)(I)On or after June 1, 2022, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care service plan coverage to any association or MEWA that provides any benefit to a resident in this state unless the association and MEWA have registered with the department and are found to be in compliance with the requirements set forth in clause (i), or unless the association and MEWA filed applications for registration pursuant to clause (i) and the applications are pending before the department. The department shall have the authority to determine compliance with the requirements set forth in clause (i).
(II)The department may issue guidance to health care service plans, associations, and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement subject to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(3)A plan that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraphs (1) and (2) with respect to small employer health care service plan contracts offered through the Exchange in those geographic regions in which the plan offers plan contracts through the Exchange.
(b)A plan shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Each plan shall provide special enrollment periods consistent with the special enrollment periods described in Section 1399.849, to the extent permitted by PPACA, except for both of the following:
(1)The special enrollment period described in paragraph (3) of subdivision (c) of Section 1399.849.
(2)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to plan contracts offered through the Exchange.
(c)A plan or solicitor shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health care service plan contract that is provided in connection with the employees employment or membership in a guaranteed association.
(d)Every plan shall file with the director the reasonable employee participation requirements and employer contribution requirements that will be applied in offering its plan contracts. Participation requirements shall be applied uniformly among all small employer groups, except that a plan may vary application of minimum employee participation requirements by the size of the small employer group and whether the employer contributes 100 percent of the eligible employees premium. Employer contribution requirements shall not vary by employer size. A health care service plan shall not establish a participation requirement that (1) requires a person who meets the definition of a dependent in Section 1357.500 to enroll as a dependent if the person is otherwise eligible for coverage and wishes to enroll as an eligible employee and (2) allows a plan to reject an otherwise eligible small employer because of the number of persons that waive coverage due to coverage through another employer. Members of an association eligible for health coverage under subdivision (m) of Section 1357.500, but not electing any health coverage through the association, shall not be counted as eligible employees for purposes of determining whether the guaranteed association meets a plans reasonable participation standards.
(e)The plan shall not reject an application from a small employer for a small employer health care service plan contract if all of the following conditions are met:
(1)The small employer offers health benefits to 100 percent of its eligible employees. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(3)The small employer agrees to inform the small employers employees of the availability of coverage and the provision that those not electing coverage must wait until the next open enrollment or a special enrollment period to obtain coverage through the group if they later decide they would like to have coverage.
(4)The employees and their dependents who are to be covered by the plan contract work or reside in the service area in which the plan provides or otherwise arranges for the provision of health care services.
(f)A plan or solicitor shall not, directly or indirectly, engage in the following activities:
(1)Encourage or direct small employers to refrain from filing an application for coverage with a plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(2)Encourage or direct small employers to seek coverage from another plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(3)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on an individuals 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.
(g)A plan shall not, directly or indirectly, enter into any contract, agreement, or arrangement with a solicitor that provides for or results in the compensation paid to a solicitor for the sale of a health care service plan contract to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer. This subdivision does not apply to a compensation arrangement that provides compensation to a solicitor on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(h)(1)A policy or contract that covers a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 1357.500, shall not establish rules for eligibility, including continued eligibility, of an individual, or dependent of an individual, to enroll under the terms of the policy or contract based on any of the following health status-related factors:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 1389.1, a health care service plan shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a small employer health care service plan contract. A health care service plan shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(i)(1)A health care service plan shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all enrollees in all nongrandfathered small employer health benefit plans offered by the health care service plan in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the health care service plan outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a health care service plan shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 1367.005, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered small employer health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A health care service plan may vary premium rates for a particular nongrandfathered small employer health care service plan contract from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the plan contract.
(B)The plan contracts provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the plan contract that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for plan contracts that offer those benefits in addition to essential health benefits.
(D)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(E)Administrative costs, excluding any user fees required by the Exchange.
(j)A plan shall comply with the requirements of Section 1374.3.
(k)This section shall remain in effect only until January 1, 2033, and as of that date is repealed.
SEC. 2.Section 1357.503 of the Health and Safety Code, as added by Chapter 736 of the Statutes of 2021, is repealed.SEC. 2.Section 1357.503 of the Health and Safety Code, as added by Section 2.3 of Chapter 736 of the Statutes of 2021, is amended to read:1357.503.(a)(1)Each plan shall fairly and affirmatively offer, market, and sell all of the plans small employer health care service plan contracts to all small employers in each service area in which the plan provides or arranges for the provision of health care services.
(2)Each plan shall make available to each small employer all small employer health care service plan contracts that the plan offers and sells to small employers or to associations that include small employers in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health coverage.
(B)Notwithstanding subparagraph (A), an association of employers may offer a large group health care service plan contract consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(i)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(ii)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(iii)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health care service plan contract in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(iv)As of January 1, 2019, the large group health care service plan contract offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 1367.008, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health care service plan contract provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations adopted pursuant to that section.
(v)The large group health care service plan contract includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health care service plan contract in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(vi)The large group health care service plan contract offers only fully insured benefits through a health care service plan licensed by the department or a health insurance policy with a disability insurer that is licensed by the Department of Insurance. The benefits offered under the large group health care service plan contract shall be considered fully insured only if the terms of the health care service plan contract provide for benefits, the amount of all of which the department determines are guaranteed under a health care service plan contract issued by a health care service plan licensed by the department.
(vii)The number of total employees, including employees described in clause (v), employed by all participating employers in each year is at least 101 employees.
(viii)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(ix)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(x)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health care service plan contract, in form and in substance.
(xi)The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health care service plan contract based on health status or claims of any employee or dependent.
(xii)The MEWA files an application for registration with the department on or before June 1, 2022.
(I)A MEWA that timely registers with the department and that is found to be in compliance with this subparagraph shall annually file evidence of ongoing compliance with this subparagraph with the department, in a form and manner set forth by the department.
(II)Except as provided in clause (iii) of subparagraph (C), a MEWA that does not meet the requirements of subclause (I) shall be subject to the restrictions provided in subparagraph (A).
(C)(i)On or after June 1, 2022, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in subparagraph (B) or unless the MEWA filed an application for registration pursuant to subparagraph (B) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in subparagraph (B).
(ii)The department may issue guidance to health care service plans and MEWAs regarding registration and compliance with subparagraph (B). The 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).
(iii)Subparagraph (B) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(3)A plan that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraphs (1) and (2) with respect to small employer health care service plan contracts offered through the Exchange in those geographic regions in which the plan offers plan contracts through the Exchange.
(b)A plan shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Each plan shall provide special enrollment periods consistent with the special enrollment periods described in Section 1399.849, to the extent permitted by PPACA, except for both of the following:
(1)The special enrollment period described in paragraph (3) of subdivision (c) of Section 1399.849.
(2)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to plan contracts offered through the Exchange.
(c)A plan or solicitor shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health care service plan contract that is provided in connection with the employees employment or membership in a guaranteed association.
(d)Every plan shall file with the director the reasonable employee participation requirements and employer contribution requirements that will be applied in offering its plan contracts. Participation requirements shall be applied uniformly among all small employer groups, except that a plan may vary application of minimum employee participation requirements by the size of the small employer group and whether the employer contributes 100 percent of the eligible employees premium. Employer contribution requirements shall not vary by employer size. A health care service plan shall not establish a participation requirement that (1) requires a person who meets the definition of a dependent in Section 1357.500 to enroll as a dependent if the person is otherwise eligible for coverage and wishes to enroll as an eligible employee and (2) allows a plan to reject an otherwise eligible small employer because of the number of persons that waive coverage due to coverage through another employer. Members of an association eligible for health coverage under subdivision (m) of Section 1357.500, but not electing any health coverage through the association, shall not be counted as eligible employees for purposes of determining whether the guaranteed association meets a plans reasonable participation standards.
(e)The plan shall not reject an application from a small employer for a small employer health care service plan contract if all of the following conditions are met:
(1)The small employer offers health benefits to 100 percent of its eligible employees. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(3)The small employer agrees to inform the small employers employees of the availability of coverage and the provision that those not electing coverage must wait until the next open enrollment or a special enrollment period to obtain coverage through the group if they later decide they would like to have coverage.
(4)The employees and their dependents who are to be covered by the plan contract work or reside in the service area in which the plan provides or otherwise arranges for the provision of health care services.
(f)A plan or solicitor shall not, directly or indirectly, engage in the following activities:
(1)Encourage or direct small employers to refrain from filing an application for coverage with a plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(2)Encourage or direct small employers to seek coverage from another plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(3)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on an individuals 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.
(g)A plan shall not, directly or indirectly, enter into any contract, agreement, or arrangement with a solicitor that provides for or results in the compensation paid to a solicitor for the sale of a health care service plan contract to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer. This subdivision does not apply to a compensation arrangement that provides compensation to a solicitor on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(h)(1)A policy or contract that covers a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 1357.500, shall not establish rules for eligibility, including continued eligibility, of an individual, or dependent of an individual, to enroll under the terms of the policy or contract based on any of the following health status-related factors:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 1389.1, a health care service plan shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a small employer health care service plan contract. A health care service plan shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(i)(1)A health care service plan shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all enrollees in all nongrandfathered small employer health benefit plans offered by the health care service plan in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the health care service plan outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a health care service plan shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 1367.005, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered small employer health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A health care service plan may vary premium rates for a particular nongrandfathered small employer health care service plan contract from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the plan contract.
(B)The plan contracts provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the plan contract that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for plan contracts that offer those benefits in addition to essential health benefits.
(D)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(E)Administrative costs, excluding any user fees required by the Exchange.
(j)A plan shall comply with the requirements of Section 1374.3.
(k)This section shall become operative on January 1, 2026. 2033.
SEC. 3.Section 10753.05 of the Insurance Code, as amended by Chapter 764 Section 9.3 of the StatutesChapter 764 of the Statutes of 2021, is amended to read:10753.05.(a)A group or individual policy or contract or certificate of group insurance or statement of group coverage providing benefits to employees of small employers as defined in this chapter shall not be issued or delivered by a carrier subject to the jurisdiction of the commissioner regardless of the situs of the contract or master policyholder or of the domicile of the carrier nor, except as otherwise provided in Sections 10270.91 and 10270.92, shall a carrier provide coverage subject to this chapter until a copy of the form of the policy, contract, certificate, or statement of coverage is filed with and approved by the commissioner in accordance with Sections 10290 and 10291, and the carrier has complied with the requirements of Section 10753.17.
(b)(1)Each carrier shall fairly and affirmatively offer, market, and sell all of the carriers health benefit plans that are sold to, offered through, or sponsored by, small employers or associations that include small employers for plan years on or after January 1, 2014, to all small employers in each geographic region in which the carrier makes coverage available or provides benefits.
(2)A carrier that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraph (1) with respect to health benefit plans offered through the Exchange in those geographic regions in which the carrier offers plans through the Exchange.
(3)A carrier shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Commencing January 1, 2014, a carrier shall provide special enrollment periods consistent with the special enrollment periods described in Section 10965.3, to the extent permitted by PPACA, except for both of the following:
(A)The special enrollment period described in paragraph (3) of subdivision (c) of Section 10965.3.
(B)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to health benefit plans offered through the Exchange.
(4)This section does not require an association, or a trust established and maintained by an association to receive a master insurance policy issued by an admitted insurer and to administer the benefits thereof solely for association members, to offer, market, or sell a benefit plan design to those who are not members of the association. However, if the association markets, offers, or sells a benefit plan design to those who are not members of the association it is subject to the requirements of this section. This section applies to an association that otherwise meets the requirements of paragraph (8) formed by merger of two or more associations after January 1, 1992, if the predecessor organizations had been in active existence on January 1, 1992, and for at least five years prior to that date and met the requirements of paragraph (5).
(5)A carrier which (A) effective January 1, 1992, and at least 20 years prior to that date, markets, offers, or sells benefit plan designs only to all members of one association and (B) does not market, offer, or sell any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits shall not be required to market, offer, or sell to those who are not members of the association. However, if the carrier markets, offers, or sells any benefit plan design or any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits to those who are not members of the association it is subject to the requirements of this section.
(6)Each carrier that sells health benefit plans to members of one association pursuant to paragraph (5) shall submit an annual statement to the commissioner which states that the carrier is selling health benefit plans pursuant to paragraph (5) and which, for the one association, lists all the information required by paragraph (7).
(7)Each carrier that sells health benefit plans to members of any association shall submit an annual statement to the commissioner which lists each association to which the carrier sells health benefit plans, the industry or profession which is served by the association, the associations membership criteria, a list of officers, the state in which the association is organized, and the site of its principal office.
(8)For purposes of paragraphs (4) and (6), an association is a nonprofit organization composed of a group of individuals or employers who associate based solely on participation in a specified profession or industry, accepting for membership any individual or small employer meeting its membership criteria, which do not condition membership directly or indirectly on the health or claims history of any person, which uses membership dues solely for and in consideration of the membership and membership benefits, except that the amount of the dues shall not depend on whether the member applies for or purchases insurance offered by the association, which is organized and maintained in good faith for purposes unrelated to insurance, which has been in active existence on January 1, 1992, and at least five years prior to that date, which has a constitution and bylaws, or other analogous governing documents that provide for election of the governing board of the association by its members, which has contracted with one or more carriers to offer one or more health benefit plans to all individual members and small employer members in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health insurance coverage.
(B)(i)Notwithstanding subparagraphs (A) and (C), an association of employers may offer a large group health insurance policy consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(III)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health insurance policy in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)As of January 1, 2019, the large group health insurance policy offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 10112.295, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health insurance policy provides coverage for essential health benefits consistent with Section 10112.27 and any rules or regulations adopted pursuant to that section.
(V)The large group health insurance policy includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health insurance policy in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(VI)The large group health insurance policy offers only fully insured benefits through a health insurer or disability insurer licensed by the department. The benefits offered under the large group health insurance policy shall be considered fully insured only if the terms of the health insurance policy provide for benefits, the amount of all of which the department determines are guaranteed under a policy of insurance issued by an insurer licensed by the department.
(VII)The number of total employees, including employees described in subclause (V), employed by all participating employers in each year is at least 101 employees.
(VIII)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(IX)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(X)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health insurance policy, in form and in substance.
(XI)The large group health insurance policy is treated as a single-risk-rated policy that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health insurance policy based on health status or claims of any employee or dependent.
(XII)The MEWA files an application for registration with the department on or before June 1, 2022.
(ia)A MEWA that timely registers with the department and that is found to be in compliance with this clause shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), a MEWA that does not meet the requirements of sub-subclause (ia) shall be subject to the restrictions provided in subparagraph (A).
(ii)(I)On or after June 1, 2022, a health insurer shall not market, issue, amend, renew, or deliver large employer health insurance coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in clause (i) or unless the MEWA filed an application for registration pursuant to clause (i) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in clause (i).
(II)The department may issue guidance to health insurers and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1.
(C)(i)Notwithstanding subparagraphs (A) and (B), an association of employers may offer a large group health insurance policy to small group employer members of the association, consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state, was established prior to March 23, 2010, has been in continuous existence since that date, and is a bona fide association or group of employers under ERISA that may act as an employer under Section 3(5) of ERISA (29 U.S.C. Sec. 1002(5)). The association is the sponsor of a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144), is headquartered in California, and is in full compliance with all applicable state and federal laws.
(III)The MEWA has offered a large group health insurance policy since January 1, 2012, in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)The large group health insurance policy offers to employees a level of coverage having an actuarial value or equivalent to, or greater than, the platinum level of coverage pursuant to Section 10112.297 available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and provides coverage for essential health benefits consistent with Section 10112.27 and Article 22 (commencing with Section 2594) of Subchapter 3 of Chapter 5 of Title 10 of the California Code of Regulations.
(V)The large group health insurance policy includes coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California.
(VI)The large group health insurance policy offers only fully insured benefits through a health insurance policy with a health insurer that is licensed by the department.
(VII)The association members purchasing health coverage have a minimum of four full-time common law employees and are current employer members of the association sponsoring the MEWA. Employer members of the association subsidize employee premium by at least 51 percent.
(VIII)The association is an organization with business and organizational purposes unrelated to the provision of health care benefits and existed prior to the establishment of the MEWA offering the employee welfare benefit plan.
(IX)The participating member employers have a commonality of interests from being in the same industry, unrelated to the provision of health care benefits.
(X)Membership in the association is open solely to employers, and the participating member employers, either directly or indirectly, exercise control over the employee welfare benefit plan, the MEWA, and the large group health insurance policy, both in form and substance.
(XI)The large group health insurance policy is treated as a single-risk-rated contract that is guaranteed issued and renewable for member employers, as well as their employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health status or claims of any person. An employer otherwise eligible for coverage is not excluded from participating in a MEWA, or offering or renewing the large group health insurance policy based on health status or claims of any employee or dependent.
(XII)The MEWA at all times covers at least 101 employees.
(XIII)The association and the MEWA file applications for registration with the department on or before June 1, 2022.
(ia)An association and the MEWA that timely register with the department prior to June 1, 2022, and that are found to be in compliance with this clause, shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), an association and MEWA that do not meet the requirements of sub-subclause (ia) shall be subject to the restrictions in subparagraph (A).
(ic)An association and MEWA that have registered with the department and fail to show ongoing compliance in its annual filing shall be subject to the restrictions in subparagraph (A).
(id)On or before June 30, 2032, the department shall provide the health policy committees of the Legislature the most recent filings made pursuant to sub-subclause (ia) and shall provide a recommendation to the Legislature as to whether any MEWAs that have registered with the department pursuant to this subclause should cease to be operative or whether they should remain operative based on compliance with this clause.
(ie)The filings and recommendations to be submitted pursuant to sub-subclause (id) shall be submitted in compliance with Section 9795 of the Government Code.
(ii)(I)On or after June 1, 2022, an insurer shall not market, issue, amend, renew, or deliver large employer health insurance coverage to any association or MEWA that provides any benefit to a resident in this state unless the association and MEWA have registered with the department and are found to be in compliance with the requirements set forth in clause (i), or unless the association and MEWA filed applications for registration pursuant to clause (xiii) of clause (i) and the applications are pending before the department. The department shall have the authority to determine compliance with the requirements set forth under clause (i).
(II)The department may issue guidance to health insurers, associations, and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement subject to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1.
(c)Each carrier shall make available to each small employer all health benefit plans that the carrier offers or sells to small employers or to associations that include small employers for plan years on or after January 1, 2014. Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(d)Each carrier shall do all of the following:
(1)Prepare a brochure that summarizes all of its health benefit plans and make this summary available to small employers, agents, and brokers upon request. The summary shall include for each plan information on benefits provided, a generic description of the manner in which services are provided, such as how access to providers is limited, benefit limitations, required copayments and deductibles, and a telephone number that can be called for more detailed benefit information. Carriers are required to keep the information contained in the brochure accurate and up to date, and, upon updating the brochure, send copies to agents and brokers representing the carrier. Any entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare a summary brochure which includes that benefit plan.
(2)For each health benefit plan, prepare a more detailed evidence of coverage and make it available to small employers, agents, and brokers upon request. The evidence of coverage shall contain all information that a prudent buyer would need to be aware of in making selections of benefit plan designs. An entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare an evidence of coverage for that health benefit plan.
(3)Provide copies of the current summary brochure to all agents or brokers who represent the carrier and, upon updating the brochure, send copies of the updated brochure to agents and brokers representing the carrier for the purpose of selling health benefit plans.
(4)Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(e)Every agent or broker representing one or more carriers for the purpose of selling health benefit plans to small employers shall do all of the following:
(1)When providing information on a health benefit plan to a small employer but making no specific recommendations on particular benefit plan designs:
(A)Advise the small employer of the carriers obligation to sell to any small employer any of the health benefit plans it offers to small employers, consistent with PPACA, and provide them, upon request, with the actual rates that would be charged to that employer for a given health benefit plan.
(B)Notify the small employer that the agent or broker will procure rate and benefit information for the small employer on any health benefit plan offered by a carrier for whom the agent or broker sells health benefit plans.
(C)Notify the small employer that, upon request, the agent or broker will provide the small employer with the summary brochure required in paragraph (1) of subdivision (d) for any benefit plan design offered by a carrier whom the agent or broker represents.
(D)Notify the small employer of the availability of coverage and the availability of tax credits for certain employers consistent with PPACA and state law, including any rules, regulations, or guidance issued in connection therewith.
(2)When recommending a particular benefit plan design or designs, advise the small employer that, upon request, the agent will provide the small employer with the brochure required by paragraph (1) of subdivision (d) containing the benefit plan design or designs being recommended by the agent or broker.
(3)Prior to filing an application for a small employer for a particular health benefit plan:
(A)For each of the health benefit plans offered by the carrier whose health benefit plan the agent or broker is presenting, provide the small employer with the benefit summary required in paragraph (1) of subdivision (d) and the premium for that particular employer.
(B)Notify the small employer that, upon request, the agent or broker will provide the small employer with an evidence of coverage brochure for each health benefit plan the carrier offers.
(C)Obtain a signed statement from the small employer acknowledging that the small employer has received the disclosures required by this paragraph and Section 10753.16.
(f)A carrier, agent, or broker shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health benefit plan which, in the case of an eligible employee meeting the definition in paragraph (1) of subdivision (f) of Section 10753, is provided in connection with the employees employment or which, in the case of an eligible employee as defined in paragraph (2) of subdivision (f) of Section 10753, is provided in connection with a guaranteed association.
(g)A carrier shall not reject an application from a small employer for a health benefit plan provided:
(1)The small employer as defined by subparagraph (A) of paragraph (1) of subdivision (q) of Section 10753 offers health benefits to 100 percent of its eligible employees as defined in paragraph (1) of subdivision (f) of Section 10753. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(h)(1)A carrier or agent or broker shall not, directly or indirectly, engage in the following activities:
(A)Encourage or direct small employers to refrain from filing an application for coverage with a carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(B)Encourage or direct small employers to seek coverage from another carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(C)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on the individuals 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.
(2)This subdivision shall be enforced in the same manner as Section 790.03, including through Sections 790.035 and 790.05.
(i)A carrier shall not, directly or indirectly, enter into any contract, agreement, or arrangement with an agent or broker that provides for or results in the compensation paid to an agent or broker for a health benefit plan to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer or the small employers employees. This subdivision shall not apply with respect to a compensation arrangement that provides compensation to an agent or broker on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(j)(1)A health benefit plan offered to a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 10753, shall 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:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 10291.5, a carrier shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a health benefit plan. A carrier shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(k)(1)A carrier shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all insureds in all nongrandfathered small employer health benefit plans offered by the carrier in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the carrier outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a carrier shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 10112.27, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A carrier may vary premium rates for a particular nongrandfathered health benefit plan from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the health benefit plan.
(B)The health benefit plans provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the health benefit plan that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for health benefit plans that offer those benefits in addition to essential health benefits.
(D)Administrative costs, excluding any user fees required by the Exchange.
(E)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(l)If a carrier enters into a contract, agreement, or other arrangement with a third-party administrator or other entity to provide administrative, marketing, or other services related to the offering of health benefit plans to small employers in this state, the third-party administrator shall be subject to this chapter.
(m)This section shall remain in effect only until January 1, 2033, and as of that date is repealed.
SEC. 4.Section 10753.05 of the Insurance Code, as added by Chapter 736 of the Statutes of 2021, is repealed.SEC. 4.Section 10753.05 of the Insurance Code, as added by Section 4.3 of Chapter 736 of the Statutes of 2021, is amended to read:10753.05.(a)A group or individual policy or contract or certificate of group insurance or statement of group coverage providing benefits to employees of small employers as defined in this chapter shall not be issued or delivered by a carrier subject to the jurisdiction of the commissioner regardless of the situs of the contract or master policyholder or of the domicile of the carrier nor, except as otherwise provided in Sections 10270.91 and 10270.92, shall a carrier provide coverage subject to this chapter until a copy of the form of the policy, contract, certificate, or statement of coverage is filed with and approved by the commissioner in accordance with Sections 10290 and 10291, and the carrier has complied with the requirements of Section 10753.17.
(b)(1)Each carrier shall fairly and affirmatively offer, market, and sell all of the carriers health benefit plans that are sold to, offered through, or sponsored by, small employers or associations that include small employers for plan years on or after January 1, 2014, to all small employers in each geographic region in which the carrier makes coverage available or provides benefits.
(2)A carrier that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraph (1) with respect to health benefit plans offered through the Exchange in those geographic regions in which the carrier offers plans through the Exchange.
(3)A carrier shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Commencing January 1, 2014, a carrier shall provide special enrollment periods consistent with the special enrollment periods described in Section 10965.3, to the extent permitted by PPACA, except for both of the following:
(A)The special enrollment period described in paragraph (3) of subdivision (c) of Section 10965.3.
(B)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to health benefit plans offered through the Exchange.
(4)This section does not require an association, or a trust established and maintained by an association to receive a master insurance policy issued by an admitted insurer and to administer the benefits thereof solely for association members, to offer, market, or sell a benefit plan design to those who are not members of the association. However, if the association markets, offers, or sells a benefit plan design to those who are not members of the association, it is subject to the requirements of this section. This section applies to an association that otherwise meets the requirements of paragraph (8) formed by merger of two or more associations after January 1, 1992, if the predecessor organizations had been in active existence on January 1, 1992, and for at least five years prior to that date and met the requirements of paragraph (5).
(5)A carrier which (A) effective January 1, 1992, and at least 20 years that date, markets, offers, or sells benefit plan designs only to all members of one association and (B) does not market, offer, or sell any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits shall not be required to market, offer, or sell to those who are not members of the association. However, if the carrier markets, offers, or sells any benefit plan design or any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits to those who are not members of the association, it is subject to the requirements of this section.
(6)Each carrier that sells health benefit plans to members of one association pursuant to paragraph (5) shall submit an annual statement to the commissioner which states that the carrier is selling health benefit plans pursuant to paragraph (5) and which, for the one association, lists all the information required by paragraph (7).
(7)Each carrier that sells health benefit plans to members of any association shall submit an annual statement to the commissioner which lists each association to which the carrier sells health benefit plans, the industry or profession which is served by the association, the associations membership criteria, a list of officers, the state in which the association is organized, and the site of its principal office.
(8)For purposes of paragraphs (4) and (6), an association is a nonprofit organization composed of a group of individuals or employers who associate based solely on participation in a specified profession or industry, accepting for membership any individual or small employer meeting its membership criteria, which do not condition membership directly or indirectly on the health or claims history of any person, which uses membership dues solely for and in consideration of the membership and membership benefits, except that the amount of the dues shall not depend on whether the member applies for or purchases insurance offered by the association, which is organized and maintained in good faith for purposes unrelated to insurance, which has been in active existence on January 1, 1992, and at least five years before that date, which has a constitution and bylaws, or other analogous governing documents that provide for election of the governing board of the association by its members, which has contracted with one or more carriers to offer one or more health benefit plans to all individual members and small employer members in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health insurance coverage.
(B)Notwithstanding subparagraph (A), an association of employers may offer a large group health insurance policy consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(i)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(ii)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(iii)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health insurance policy in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(iv)As of January 1, 2019, the large group health insurance policy offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 10112.295, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health insurance policy provides coverage for essential health benefits consistent with Section 10112.27 and any rules or regulations adopted pursuant to that section.
(v)The large group health insurance policy includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health insurance policy in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(vi)The large group health insurance policy offers only fully insured benefits through a health insurer or disability insurer licensed by the department. The benefits offered under the large group health insurance policy shall be considered fully insured only if the terms of the health insurance policy provide for benefits, the amount of all of which the department determines are guaranteed under a policy of insurance issued by an insurer licensed by the department.
(vii)The number of total employees, including employees described in clause (v), employed by all participating employers in each year is at least 101 employees.
(viii)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(ix)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(x)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health insurance policy, in form and in substance.
(xi)The large group health insurance policy is treated as a single-risk-rated policy that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health insurance policy based on health status or claims of any employee or dependent.
(xii)The MEWA files an application for registration with the department on or before June 1, 2022.
(I)A MEWA that timely registers with the department and that is found to be in compliance with this subparagraph shall annually file evidence of ongoing compliance with this subparagraph with the department, in a form and manner set forth by the department.
(II)Except as provided in clause (iii) of subparagraph (C), a MEWA that does not meet the requirements of subclause (I) shall be subject to the restrictions provided in subparagraph (A).
(C)(i)On or after June 1, 2022, a health insurer shall not market, issue, amend, renew, or deliver large employer health insurance coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in subparagraph (B) or unless the MEWA filed an application for registration pursuant to subparagraph (B) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in subparagraph (B).
(ii)The department may issue guidance to health insurers and MEWAs regarding registration and compliance with subparagraph (B). The 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).
(iii)Subparagraph (B) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1.
(c)Each carrier shall make available to each small employer all health benefit plans that the carrier offers or sells to small employers or to associations that include small employers for plan years on or after January 1, 2014. Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(d)Each carrier shall do all of the following:
(1)Prepare a brochure that summarizes all of its health benefit plans and make this summary available to small employers, agents, and brokers upon request. The summary shall include for each plan information on benefits provided, a generic description of the manner in which services are provided, such as how access to providers is limited, benefit limitations, required copayments and deductibles, and a telephone number that can be called for more detailed benefit information. Carriers are required to keep the information contained in the brochure accurate and up to date, and, upon updating the brochure, send copies to agents and brokers representing the carrier. Any entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare a summary brochure which includes that benefit plan.
(2)For each health benefit plan, prepare a more detailed evidence of coverage and make it available to small employers, agents, and brokers upon request. The evidence of coverage shall contain all information that a prudent buyer would need to be aware of in making selections of benefit plan designs. An entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare an evidence of coverage for that health benefit plan.
(3)Provide copies of the current summary brochure to all agents or brokers who represent the carrier and, upon updating the brochure, send copies of the updated brochure to agents and brokers representing the carrier for the purpose of selling health benefit plans.
(4)Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(e)Every agent or broker representing one or more carriers for the purpose of selling health benefit plans to small employers shall do all of the following:
(1)When providing information on a health benefit plan to a small employer but making no specific recommendations on particular benefit plan designs:
(A)Advise the small employer of the carriers obligation to sell to any small employer any of the health benefit plans it offers to small employers, consistent with PPACA, and provide them, upon request, with the actual rates that would be charged to that employer for a given health benefit plan.
(B)Notify the small employer that the agent or broker will procure rate and benefit information for the small employer on any health benefit plan offered by a carrier for whom the agent or broker sells health benefit plans.
(C)Notify the small employer that, upon request, the agent or broker will provide the small employer with the summary brochure required in paragraph (1) of subdivision (d) for any benefit plan design offered by a carrier whom the agent or broker represents.
(D)Notify the small employer of the availability of coverage and the availability of tax credits for certain employers consistent with PPACA and state law, including any rules, regulations, or guidance issued in connection therewith.
(2)When recommending a particular benefit plan design or designs, advise the small employer that, upon request, the agent will provide the small employer with the brochure required by paragraph (1) of subdivision (d) containing the benefit plan design or designs being recommended by the agent or broker.
(3)Prior to filing an application for a small employer for a particular health benefit plan:
(A)For each of the health benefit plans offered by the carrier whose health benefit plan the agent or broker is presenting, provide the small employer with the benefit summary required in paragraph (1) of subdivision (d) and the premium for that particular employer.
(B)Notify the small employer that, upon request, the agent or broker will provide the small employer with an evidence of coverage brochure for each health benefit plan the carrier offers.
(C)Obtain a signed statement from the small employer acknowledging that the small employer has received the disclosures required by this paragraph and Section 10753.16.
(f)A carrier, agent, or broker shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health benefit plan which, in the case of an eligible employee meeting the definition in paragraph (1) of subdivision (f) of Section 10753, is provided in connection with the employees employment or which, in the case of an eligible employee as defined in paragraph (2) of subdivision (f) of Section 10753, is provided in connection with a guaranteed association.
(g)A carrier shall not reject an application from a small employer for a health benefit plan provided:
(1)The small employer as defined by subparagraph (A) of paragraph (1) of subdivision (q) of Section 10753 offers health benefits to 100 percent of its eligible employees as defined in paragraph (1) of subdivision (f) of Section 10753. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(h)(1)A carrier or agent or broker shall not, directly or indirectly, engage in the following activities:
(A)Encourage or direct small employers to refrain from filing an application for coverage with a carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(B)Encourage or direct small employers to seek coverage from another carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(C)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on the individuals 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.
(2)This subdivision shall be enforced in the same manner as Section 790.03, including through Sections 790.035 and 790.05.
(i)A carrier shall not, directly or indirectly, enter into any contract, agreement, or arrangement with an agent or broker that provides for or results in the compensation paid to an agent or broker for a health benefit plan to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer or the small employers employees. This subdivision shall not apply with respect to a compensation arrangement that provides compensation to an agent or broker on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(j)(1)A health benefit plan offered to a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 10753, shall 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:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 10291.5, a carrier shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a health benefit plan. A carrier shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(k)(1)A carrier shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all insureds in all nongrandfathered small employer health benefit plans offered by the carrier in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the carrier outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a carrier shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 10112.27, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A carrier may vary premium rates for a particular nongrandfathered health benefit plan from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the health benefit plan.
(B)The health benefit plans provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the health benefit plan that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for health benefit plans that offer those benefits in addition to essential health benefits.
(D)Administrative costs, excluding any user fees required by the Exchange.
(E)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(l)If a carrier enters into a contract, agreement, or other arrangement with a third-party administrator or other entity to provide administrative, marketing, or other services related to the offering of health benefit plans to small employers in this state, the third-party administrator shall be subject to this chapter.
(m)This section shall become operative on January 1, 2026. 2033.
SEC. 5.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)(1)Each plan shall fairly and affirmatively offer, market, and sell all of the plans small employer health care service plan contracts to all small employers in each service area in which the plan provides or arranges for the provision of health care services.
(2)Each plan shall make available to each small employer all small employer health care service plan contracts that the plan offers and sells to small employers or to associations that include small employers in this state.
(A) Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health coverage.
(B)(i)Notwithstanding subparagraphs (A) and (C), an association of employers may offer a large group health care service plan contract consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(III)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health care service plan contract in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)As of January 1, 2019, the large group health care service plan contract offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 1367.008, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health care service plan contract provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations adopted pursuant to that section.
(V)The large group health care service plan contract includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health care service plan contract in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(VI)The large group health care service plan contract offers only fully insured benefits through a health care service plan licensed by the department or a health insurance policy with a disability insurer that is licensed by the Department of Insurance. The benefits offered under the large group health care service plan contract shall be considered fully insured only if the terms of the health care service plan contract provide for benefits, the amount of all of which the department determines are guaranteed under a health care service plan contract issued by a health care service plan licensed by the department.
(VII)The number of total employees, including employees described in subclause (V), employed by all participating employers in each year is at least 101 employees.
(VIII)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(IX)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(X)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health care service plan contract, in form and in substance.
(XI)The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health care service plan contract based on health status or claims of any employee or dependent.
(XII)The MEWA files an application for registration with the department on or before June 1, 2022.
(ia)A MEWA that timely registers with the department and that is found to be in compliance with this clause shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), a MEWA that does not meet the requirements of sub-subclause (ia) shall be subject to the restrictions provided in subparagraph (A).
(ii)(I)On or after June 1, 2022, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in clause (i) or unless the MEWA filed an application for registration pursuant to clause (i) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in clause (i).
(II)The department may issue guidance to health care service plans and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(C)(i)Notwithstanding subparagraphs (A) and (B), an association of employers may offer a large group health care service plan contract to small group employer members of the association, consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state, was established prior to March 23, 2010, has been in continuous existence since that date, and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA (29 U.S.C. Sec. 1002(5)). The association is the sponsor of a multiple employer welfare arrangement (MEWA), as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144), is headquartered in California, and is in full compliance with all applicable state and federal laws.
(III)The MEWA has offered a large group health care service plan since January 1, 2012, in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)The large group health care service plan offers to employees a level of coverage having an actuarial value or equivalent to, or greater than, the platinum level of coverage pursuant to Section 1367.009 available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code and provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations pursuant to that section.
(V)The large group health care service plan includes coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California.
(VI)The large group health care service plan offers only fully insured benefits through an insurance contract with a health care service plan licensed by the Department of Managed Health Care.
(VII)Association members purchasing health coverage have a minimum of four full-time common law employees and are current employer members of the association sponsoring the MEWA. Employer members of the association subsidize employee premiums by at least 51 percent.
(VIII)The association is an organization with business and organizational purposes unrelated to the provision of health care benefits and existed prior to the establishment of the MEWA offering the employee welfare benefit plan.
(IX)The participating member employers have a commonality of interests from being in the same industry, unrelated to the provision of health care benefits.
(X)Membership in the association is open solely to employers, and the participating member employers, either directly or indirectly, exercise control over the employee welfare benefit plan, the MEWA, and the large group health care service plan contract, both in form and substance.
(XI)The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issued and renewable for member employers, as well as their employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health status or claims of any person. An employer otherwise eligible is not excluded from participating in a MEWA, or offering or renewing the large group health care service plan contract based on health status or claims of any employee or dependent.
(XII)The MEWA at all times covers at least 101 employees.
(XIII)The association and the MEWA file applications for registration with the department on or before June 1, 2022.
(ia)An association and MEWA that timely register with the department prior to June 1, 2022, and that are found to be in compliance with this clause, shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), an association and MEWA that do not meet the requirements of sub-subclause (ia) shall be subject to the restrictions provided in subparagraph (A).
(ic)An association and MEWA that have registered with the department and fail to show ongoing compliance in their annual filing shall be subject to the restrictions in subparagraph (A).
(ii)(I)On or after June 1, 2022, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care service plan coverage to any association or MEWA that provides any benefit to a resident in this state unless the association and MEWA have registered with the department and are found to be in compliance with the requirements set forth in clause (i), or unless the association and MEWA filed applications for registration pursuant to clause (i) and the applications are pending before the department. The department shall have the authority to determine compliance with the requirements set forth in clause (i).
(II)The department may issue guidance to health care service plans, associations, and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement subject to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(3)A plan that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraphs (1) and (2) with respect to small employer health care service plan contracts offered through the Exchange in those geographic regions in which the plan offers plan contracts through the Exchange.
(b)A plan shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Each plan shall provide special enrollment periods consistent with the special enrollment periods described in Section 1399.849, to the extent permitted by PPACA, except for both of the following:
(1)The special enrollment period described in paragraph (3) of subdivision (c) of Section 1399.849.
(2)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to plan contracts offered through the Exchange.
(c)A plan or solicitor shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health care service plan contract that is provided in connection with the employees employment or membership in a guaranteed association.
(d)Every plan shall file with the director the reasonable employee participation requirements and employer contribution requirements that will be applied in offering its plan contracts. Participation requirements shall be applied uniformly among all small employer groups, except that a plan may vary application of minimum employee participation requirements by the size of the small employer group and whether the employer contributes 100 percent of the eligible employees premium. Employer contribution requirements shall not vary by employer size. A health care service plan shall not establish a participation requirement that (1) requires a person who meets the definition of a dependent in Section 1357.500 to enroll as a dependent if the person is otherwise eligible for coverage and wishes to enroll as an eligible employee and (2) allows a plan to reject an otherwise eligible small employer because of the number of persons that waive coverage due to coverage through another employer. Members of an association eligible for health coverage under subdivision (m) of Section 1357.500, but not electing any health coverage through the association, shall not be counted as eligible employees for purposes of determining whether the guaranteed association meets a plans reasonable participation standards.
(e)The plan shall not reject an application from a small employer for a small employer health care service plan contract if all of the following conditions are met:
(1)The small employer offers health benefits to 100 percent of its eligible employees. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(3)The small employer agrees to inform the small employers employees of the availability of coverage and the provision that those not electing coverage must wait until the next open enrollment or a special enrollment period to obtain coverage through the group if they later decide they would like to have coverage.
(4)The employees and their dependents who are to be covered by the plan contract work or reside in the service area in which the plan provides or otherwise arranges for the provision of health care services.
(f)A plan or solicitor shall not, directly or indirectly, engage in the following activities:
(1)Encourage or direct small employers to refrain from filing an application for coverage with a plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(2)Encourage or direct small employers to seek coverage from another plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.
(3)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on an individuals 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.
(g)A plan shall not, directly or indirectly, enter into any contract, agreement, or arrangement with a solicitor that provides for or results in the compensation paid to a solicitor for the sale of a health care service plan contract to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer. This subdivision does not apply to a compensation arrangement that provides compensation to a solicitor on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(h)(1)A policy or contract that covers a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 1357.500, shall not establish rules for eligibility, including continued eligibility, of an individual, or dependent of an individual, to enroll under the terms of the policy or contract based on any of the following health status-related factors:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 1389.1, a health care service plan shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a small employer health care service plan contract. A health care service plan shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(i)(1)A health care service plan shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all enrollees in all nongrandfathered small employer health benefit plans offered by the health care service plan in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the health care service plan outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a health care service plan shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 1367.005, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered small employer health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A health care service plan may vary premium rates for a particular nongrandfathered small employer health care service plan contract from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the plan contract.
(B)The plan contracts provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the plan contract that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for plan contracts that offer those benefits in addition to essential health benefits.
(D)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(E)Administrative costs, excluding any user fees required by the Exchange.
(j)A plan shall comply with the requirements of Section 1374.3.
(k)This section shall remain in effect only until January 1, 2026, and as of that date is repealed.SEC. 2.Section 1357.503 of the Health and Safety Code, as added by Chapter 736 of the Statutes of 2021, is repealed.1357.503.(a)(1)Each plan shall fairly and affirmatively offer, market, and sell all of the plans small employer health care service plan contracts to all small employers in each service area in which the plan provides or arranges for the provision of health care services.(2)Each plan shall make available to each small employer all small employer health care service plan contracts that the plan offers and sells to small employers or to associations that include small employers in this state.(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health coverage.(B)Notwithstanding subparagraph (A), an association of employers may offer a large group health care service plan contract consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:(i)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).(ii)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.(iii)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health care service plan contract in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).(iv)As of January 1, 2019, the large group health care service plan contract offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 1367.008, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health care service plan contract provides coverage for essential health benefits consistent with Section 1367.005 and any rules or regulations adopted pursuant to that section.(v)The large group health care service plan contract includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health care service plan contract in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.(vi)The large group health care service plan contract offers only fully insured benefits through a health care service plan licensed by the department or a health insurance policy with a disability insurer that is licensed by the Department of Insurance. The benefits offered under the large group health care service plan contract shall be considered fully insured only if the terms of the health care service plan contract provide for benefits, the amount of all of which the department determines are guaranteed under a health care service plan contract issued by a health care service plan licensed by the department.(vii)The number of total employees, including employees described in clause (v), employed by all participating employers in each year is at least 101 employees.(viii)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.(ix)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).(x)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health care service plan contract, in form and in substance.(xi)The large group health care service plan contract is treated as a single-risk-rated contract that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health care service plan contract based on health status or claims of any employee or dependent.(xii)The MEWA files an application for registration with the department on or before June 1, 2022.(I)A MEWA that timely registers with the department and that is found to be in compliance with this subparagraph shall annually file evidence of ongoing compliance with this subparagraph with the department, in a form and manner set forth by the department.(II)Except as provided in clause (iii) of subparagraph (C), a MEWA that does not meet the requirements of subclause (I) shall be subject to the restrictions provided in subparagraph (A).(C)(i)On or after June 1, 2022, a health care service plan shall not market, issue, amend, renew, or deliver large employer health care coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in subparagraph (B) or unless the MEWA filed an application for registration pursuant to subparagraph (B) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in subparagraph (B).(ii)The department may issue guidance to health care service plans and MEWAs regarding registration and compliance with subparagraph (B). The 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).(iii)Subparagraph (B) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1 of the Insurance Code.(3)A plan that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraphs (1) and (2) with respect to small employer health care service plan contracts offered through the Exchange in those geographic regions in which the plan offers plan contracts through the Exchange.(b)A plan shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Each plan shall provide special enrollment periods consistent with the special enrollment periods described in Section 1399.849, to the extent permitted by PPACA, except for both of the following:(1)The special enrollment period described in paragraph (3) of subdivision (c) of Section 1399.849.(2)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to plan contracts offered through the Exchange.(c)A plan or solicitor shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health care service plan contract that is provided in connection with the employees employment or membership in a guaranteed association.(d)Every plan shall file with the director the reasonable employee participation requirements and employer contribution requirements that will be applied in offering its plan contracts. Participation requirements shall be applied uniformly among all small employer groups, except that a plan may vary application of minimum employee participation requirements by the size of the small employer group and whether the employer contributes 100 percent of the eligible employees premium. Employer contribution requirements shall not vary by employer size. A health care service plan shall not establish a participation requirement that (1) requires a person who meets the definition of a dependent in Section 1357.500 to enroll as a dependent if the person is otherwise eligible for coverage and wishes to enroll as an eligible employee and (2) allows a plan to reject an otherwise eligible small employer because of the number of persons that waive coverage due to coverage through another employer. Members of an association eligible for health coverage under subdivision (m) of Section 1357.500, but not electing any health coverage through the association, shall not be counted as eligible employees for purposes of determining whether the guaranteed association meets a plans reasonable participation standards.(e)The plan shall not reject an application from a small employer for a small employer health care service plan contract if all of the following conditions are met:(1)The small employer offers health benefits to 100 percent of its eligible employees. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.(2)The small employer agrees to make the required premium payments.(3)The small employer agrees to inform the small employers employees of the availability of coverage and the provision that those not electing coverage must wait until the next open enrollment or a special enrollment period to obtain coverage through the group if they later decide they would like to have coverage.(4)The employees and their dependents who are to be covered by the plan contract work or reside in the service area in which the plan provides or otherwise arranges for the provision of health care services.(f)A plan or solicitor shall not, directly or indirectly, engage in the following activities:(1)Encourage or direct small employers to refrain from filing an application for coverage with a plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.(2)Encourage or direct small employers to seek coverage from another plan because of the health status, claims experience, industry, occupation of the small employer, or geographic location provided that it is within the plans approved service area.(3)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on an individuals 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.(g)A plan shall not, directly or indirectly, enter into any contract, agreement, or arrangement with a solicitor that provides for or results in the compensation paid to a solicitor for the sale of a health care service plan contract to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer. This subdivision does not apply to a compensation arrangement that provides compensation to a solicitor on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.(h)(1)A policy or contract that covers a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 1357.500, shall not establish rules for eligibility, including continued eligibility, of an individual, or dependent of an individual, to enroll under the terms of the policy or contract based on any of the following health status-related factors:(A)Health status.(B)Medical condition, including physical and mental illnesses.(C)Claims experience.(D)Receipt of health care.(E)Medical history.(F)Genetic information.(G)Evidence of insurability, including conditions arising out of acts of domestic violence.(H)Disability.(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.(2)Notwithstanding Section 1389.1, a health care service plan shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a small employer health care service plan contract. A health care service plan shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.(i)(1)A health care service plan shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all enrollees in all nongrandfathered small employer health benefit plans offered by the health care service plan in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the health care service plan outside of the Exchange.(2)At least each calendar year, and no more frequently than each calendar quarter, a health care service plan shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 1367.005, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered small employer health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).(3)A health care service plan may vary premium rates for a particular nongrandfathered small employer health care service plan contract from its index rate based only on the following actuarially justified plan-specific factors:(A)The actuarial value and cost-sharing design of the plan contract.(B)The plan contracts provider network, delivery system characteristics, and utilization management practices.(C)The benefits provided under the plan contract that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for plan contracts that offer those benefits in addition to essential health benefits.(D)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.(E)Administrative costs, excluding any user fees required by the Exchange.(j)A plan shall comply with the requirements of Section 1374.3.(k)This section shall become operative on January 1, 2026.SEC. 3.Section 10753.05 of the Insurance Code, as amended by Chapter 764 of the Statutes of 2021, is amended to read:10753.05.(a)A group or individual policy or contract or certificate of group insurance or statement of group coverage providing benefits to employees of small employers as defined in this chapter shall not be issued or delivered by a carrier subject to the jurisdiction of the commissioner regardless of the situs of the contract or master policyholder or of the domicile of the carrier nor, except as otherwise provided in Sections 10270.91 and 10270.92, shall a carrier provide coverage subject to this chapter until a copy of the form of the policy, contract, certificate, or statement of coverage is filed with and approved by the commissioner in accordance with Sections 10290 and 10291, and the carrier has complied with the requirements of Section 10753.17.
(b)(1)Each carrier shall fairly and affirmatively offer, market, and sell all of the carriers health benefit plans that are sold to, offered through, or sponsored by, small employers or associations that include small employers for plan years on or after January 1, 2014, to all small employers in each geographic region in which the carrier makes coverage available or provides benefits.
(2)A carrier that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraph (1) with respect to health benefit plans offered through the Exchange in those geographic regions in which the carrier offers plans through the Exchange.
(3)A carrier shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Commencing January 1, 2014, a carrier shall provide special enrollment periods consistent with the special enrollment periods described in Section 10965.3, to the extent permitted by PPACA, except for both of the following:
(A)The special enrollment period described in paragraph (3) of subdivision (c) of Section 10965.3.
(B)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to health benefit plans offered through the Exchange.
(4)This section does not require an association, or a trust established and maintained by an association to receive a master insurance policy issued by an admitted insurer and to administer the benefits thereof solely for association members, to offer, market, or sell a benefit plan design to those who are not members of the association. However, if the association markets, offers, or sells a benefit plan design to those who are not members of the association it is subject to the requirements of this section. This section applies to an association that otherwise meets the requirements of paragraph (8) formed by merger of two or more associations after January 1, 1992, if the predecessor organizations had been in active existence on January 1, 1992, and for at least five years prior to that date and met the requirements of paragraph (5).
(5)A carrier which (A) effective January 1, 1992, and at least 20 years prior to that date, markets, offers, or sells benefit plan designs only to all members of one association and (B) does not market, offer, or sell any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits shall not be required to market, offer, or sell to those who are not members of the association. However, if the carrier markets, offers, or sells any benefit plan design or any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits to those who are not members of the association it is subject to the requirements of this section.
(6)Each carrier that sells health benefit plans to members of one association pursuant to paragraph (5) shall submit an annual statement to the commissioner which states that the carrier is selling health benefit plans pursuant to paragraph (5) and which, for the one association, lists all the information required by paragraph (7).
(7)Each carrier that sells health benefit plans to members of any association shall submit an annual statement to the commissioner which lists each association to which the carrier sells health benefit plans, the industry or profession which is served by the association, the associations membership criteria, a list of officers, the state in which the association is organized, and the site of its principal office.
(8)For purposes of paragraphs (4) and (6), an association is a nonprofit organization composed of a group of individuals or employers who associate based solely on participation in a specified profession or industry, accepting for membership any individual or small employer meeting its membership criteria, which do not condition membership directly or indirectly on the health or claims history of any person, which uses membership dues solely for and in consideration of the membership and membership benefits, except that the amount of the dues shall not depend on whether the member applies for or purchases insurance offered by the association, which is organized and maintained in good faith for purposes unrelated to insurance, which has been in active existence on January 1, 1992, and at least five years prior to that date, which has a constitution and bylaws, or other analogous governing documents that provide for election of the governing board of the association by its members, which has contracted with one or more carriers to offer one or more health benefit plans to all individual members and small employer members in this state.
(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health insurance coverage.
(B)(i)Notwithstanding subparagraphs (A) and (C), an association of employers may offer a large group health insurance policy consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.
(III)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health insurance policy in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)As of January 1, 2019, the large group health insurance policy offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 10112.295, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health insurance policy provides coverage for essential health benefits consistent with Section 10112.27 and any rules or regulations adopted pursuant to that section.
(V)The large group health insurance policy includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health insurance policy in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.
(VI)The large group health insurance policy offers only fully insured benefits through a health insurer or disability insurer licensed by the department. The benefits offered under the large group health insurance policy shall be considered fully insured only if the terms of the health insurance policy provide for benefits, the amount of all of which the department determines are guaranteed under a policy of insurance issued by an insurer licensed by the department.
(VII)The number of total employees, including employees described in subclause (V), employed by all participating employers in each year is at least 101 employees.
(VIII)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.
(IX)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).
(X)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health insurance policy, in form and in substance.
(XI)The large group health insurance policy is treated as a single-risk-rated policy that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health insurance policy based on health status or claims of any employee or dependent.
(XII)The MEWA files an application for registration with the department on or before June 1, 2022.
(ia)A MEWA that timely registers with the department and that is found to be in compliance with this clause shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), a MEWA that does not meet the requirements of sub-subclause (ia) shall be subject to the restrictions provided in subparagraph (A).
(ii)(I)On or after June 1, 2022, a health insurer shall not market, issue, amend, renew, or deliver large employer health insurance coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in clause (i) or unless the MEWA filed an application for registration pursuant to clause (i) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in clause (i).
(II)The department may issue guidance to health insurers and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1.
(C)(i)Notwithstanding subparagraphs (A) and (B), an association of employers may offer a large group health insurance policy to small group employer members of the association, consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:
(I)The association is headquartered in this state, was established prior to March 23, 2010, has been in continuous existence since that date, and is a bona fide association or group of employers under ERISA that may act as an employer under Section 3(5) of ERISA (29 U.S.C. Sec. 1002(5)). The association is the sponsor of a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).
(II)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144), is headquartered in California, and is in full compliance with all applicable state and federal laws.
(III)The MEWA has offered a large group health insurance policy since January 1, 2012, in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).
(IV)The large group health insurance policy offers to employees a level of coverage having an actuarial value or equivalent to, or greater than, the platinum level of coverage pursuant to Section 10112.297 available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and provides coverage for essential health benefits consistent with Section 10112.27 and Article 22 (commencing with Section 2594) of Subchapter 3 of Chapter 5 of Title 10 of the California Code of Regulations.
(V)The large group health insurance policy includes coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California.
(VI)The large group health insurance policy offers only fully insured benefits through a health insurance policy with a health insurer that is licensed by the department.
(VII)The association members purchasing health coverage have a minimum of four full-time common law employees and are current employer members of the association sponsoring the MEWA. Employer members of the association subsidize employee premium by at least 51 percent.
(VIII)The association is an organization with business and organizational purposes unrelated to the provision of health care benefits and existed prior to the establishment of the MEWA offering the employee welfare benefit plan.
(IX)The participating member employers have a commonality of interests from being in the same industry, unrelated to the provision of health care benefits.
(X)Membership in the association is open solely to employers, and the participating member employers, either directly or indirectly, exercise control over the employee welfare benefit plan, the MEWA, and the large group health insurance policy, both in form and substance.
(XI)The large group health insurance policy is treated as a single-risk-rated contract that is guaranteed issued and renewable for member employers, as well as their employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health status or claims of any person. An employer otherwise eligible for coverage is not excluded from participating in a MEWA, or offering or renewing the large group health insurance policy based on health status or claims of any employee or dependent.
(XII)The MEWA at all times covers at least 101 employees.
(XIII)The association and the MEWA file applications for registration with the department on or before June 1, 2022.
(ia)An association and the MEWA that timely register with the department prior to June 1, 2022, and that are found to be in compliance with this clause, shall annually file evidence of ongoing compliance with this clause with the department, in a form and manner set forth by the department.
(ib)Except as provided in subclause (III) of clause (ii), an association and MEWA that do not meet the requirements of sub-subclause (ia) shall be subject to the restrictions in subparagraph (A).
(ic)An association and MEWA that have registered with the department and fail to show ongoing compliance in its annual filing shall be subject to the restrictions in subparagraph (A).
(ii)(I)On or after June 1, 2022, an insurer shall not market, issue, amend, renew, or deliver large employer health insurance coverage to any association or MEWA that provides any benefit to a resident in this state unless the association and MEWA have registered with the department and are found to be in compliance with the requirements set forth in clause (i), or unless the association and MEWA filed applications for registration pursuant to clause (xiii) of clause (i) and the applications are pending before the department. The department shall have the authority to determine compliance with the requirements set forth under clause (i).
(II)The department may issue guidance to health insurers, associations, and MEWAs regarding registration and compliance with clause (i). The 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).
(III)Clause (i) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement subject to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1.
(c)Each carrier shall make available to each small employer all health benefit plans that the carrier offers or sells to small employers or to associations that include small employers for plan years on or after January 1, 2014. Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(d)Each carrier shall do all of the following:
(1)Prepare a brochure that summarizes all of its health benefit plans and make this summary available to small employers, agents, and brokers upon request. The summary shall include for each plan information on benefits provided, a generic description of the manner in which services are provided, such as how access to providers is limited, benefit limitations, required copayments and deductibles, and a telephone number that can be called for more detailed benefit information. Carriers are required to keep the information contained in the brochure accurate and up to date, and, upon updating the brochure, send copies to agents and brokers representing the carrier. Any entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare a summary brochure which includes that benefit plan.
(2)For each health benefit plan, prepare a more detailed evidence of coverage and make it available to small employers, agents, and brokers upon request. The evidence of coverage shall contain all information that a prudent buyer would need to be aware of in making selections of benefit plan designs. An entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare an evidence of coverage for that health benefit plan.
(3)Provide copies of the current summary brochure to all agents or brokers who represent the carrier and, upon updating the brochure, send copies of the updated brochure to agents and brokers representing the carrier for the purpose of selling health benefit plans.
(4)Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.
(e)Every agent or broker representing one or more carriers for the purpose of selling health benefit plans to small employers shall do all of the following:
(1)When providing information on a health benefit plan to a small employer but making no specific recommendations on particular benefit plan designs:
(A)Advise the small employer of the carriers obligation to sell to any small employer any of the health benefit plans it offers to small employers, consistent with PPACA, and provide them, upon request, with the actual rates that would be charged to that employer for a given health benefit plan.
(B)Notify the small employer that the agent or broker will procure rate and benefit information for the small employer on any health benefit plan offered by a carrier for whom the agent or broker sells health benefit plans.
(C)Notify the small employer that, upon request, the agent or broker will provide the small employer with the summary brochure required in paragraph (1) of subdivision (d) for any benefit plan design offered by a carrier whom the agent or broker represents.
(D)Notify the small employer of the availability of coverage and the availability of tax credits for certain employers consistent with PPACA and state law, including any rules, regulations, or guidance issued in connection therewith.
(2)When recommending a particular benefit plan design or designs, advise the small employer that, upon request, the agent will provide the small employer with the brochure required by paragraph (1) of subdivision (d) containing the benefit plan design or designs being recommended by the agent or broker.
(3)Prior to filing an application for a small employer for a particular health benefit plan:
(A)For each of the health benefit plans offered by the carrier whose health benefit plan the agent or broker is presenting, provide the small employer with the benefit summary required in paragraph (1) of subdivision (d) and the premium for that particular employer.
(B)Notify the small employer that, upon request, the agent or broker will provide the small employer with an evidence of coverage brochure for each health benefit plan the carrier offers.
(C)Obtain a signed statement from the small employer acknowledging that the small employer has received the disclosures required by this paragraph and Section 10753.16.
(f)A carrier, agent, or broker shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health benefit plan which, in the case of an eligible employee meeting the definition in paragraph (1) of subdivision (f) of Section 10753, is provided in connection with the employees employment or which, in the case of an eligible employee as defined in paragraph (2) of subdivision (f) of Section 10753, is provided in connection with a guaranteed association.
(g)A carrier shall not reject an application from a small employer for a health benefit plan provided:
(1)The small employer as defined by subparagraph (A) of paragraph (1) of subdivision (q) of Section 10753 offers health benefits to 100 percent of its eligible employees as defined in paragraph (1) of subdivision (f) of Section 10753. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.
(2)The small employer agrees to make the required premium payments.
(h)(1)A carrier or agent or broker shall not, directly or indirectly, engage in the following activities:
(A)Encourage or direct small employers to refrain from filing an application for coverage with a carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(B)Encourage or direct small employers to seek coverage from another carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.
(C)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on the individuals 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.
(2)This subdivision shall be enforced in the same manner as Section 790.03, including through Sections 790.035 and 790.05.
(i)A carrier shall not, directly or indirectly, enter into any contract, agreement, or arrangement with an agent or broker that provides for or results in the compensation paid to an agent or broker for a health benefit plan to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer or the small employers employees. This subdivision shall not apply with respect to a compensation arrangement that provides compensation to an agent or broker on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
(j)(1)A health benefit plan offered to a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 10753, shall 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:
(A)Health status.
(B)Medical condition, including physical and mental illnesses.
(C)Claims experience.
(D)Receipt of health care.
(E)Medical history.
(F)Genetic information.
(G)Evidence of insurability, including conditions arising out of acts of domestic violence.
(H)Disability.
(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.
(2)Notwithstanding Section 10291.5, a carrier shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a health benefit plan. A carrier shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.
(k)(1)A carrier shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all insureds in all nongrandfathered small employer health benefit plans offered by the carrier in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the carrier outside of the Exchange.
(2)At least each calendar year, and no more frequently than each calendar quarter, a carrier shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 10112.27, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).
(3)A carrier may vary premium rates for a particular nongrandfathered health benefit plan from its index rate based only on the following actuarially justified plan-specific factors:
(A)The actuarial value and cost-sharing design of the health benefit plan.
(B)The health benefit plans provider network, delivery system characteristics, and utilization management practices.
(C)The benefits provided under the health benefit plan that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for health benefit plans that offer those benefits in addition to essential health benefits.
(D)Administrative costs, excluding any user fees required by the Exchange.
(E)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.
(l)If a carrier enters into a contract, agreement, or other arrangement with a third-party administrator or other entity to provide administrative, marketing, or other services related to the offering of health benefit plans to small employers in this state, the third-party administrator shall be subject to this chapter.
(m)This section shall remain in effect only until January 1, 2026, and as of that date is repealed.SEC. 4.Section 10753.05 of the Insurance Code, as added by Chapter 736 of the Statutes of 2021, is repealed.10753.05.(a)A group or individual policy or contract or certificate of group insurance or statement of group coverage providing benefits to employees of small employers as defined in this chapter shall not be issued or delivered by a carrier subject to the jurisdiction of the commissioner regardless of the situs of the contract or master policyholder or of the domicile of the carrier nor, except as otherwise provided in Sections 10270.91 and 10270.92, shall a carrier provide coverage subject to this chapter until a copy of the form of the policy, contract, certificate, or statement of coverage is filed with and approved by the commissioner in accordance with Sections 10290 and 10291, and the carrier has complied with the requirements of Section 10753.17.(b)(1)Each carrier shall fairly and affirmatively offer, market, and sell all of the carriers health benefit plans that are sold to, offered through, or sponsored by, small employers or associations that include small employers for plan years on or after January 1, 2014, to all small employers in each geographic region in which the carrier makes coverage available or provides benefits.(2)A carrier that offers qualified health plans through the Exchange shall be deemed to be in compliance with paragraph (1) with respect to health benefit plans offered through the Exchange in those geographic regions in which the carrier offers plans through the Exchange.(3)A carrier shall provide enrollment periods consistent with PPACA and described in Section 155.725 of Title 45 of the Code of Federal Regulations. Commencing January 1, 2014, a carrier shall provide special enrollment periods consistent with the special enrollment periods described in Section 10965.3, to the extent permitted by PPACA, except for both of the following:(A)The special enrollment period described in paragraph (3) of subdivision (c) of Section 10965.3.(B)The triggering events identified in paragraphs (d)(3) and (d)(6) of Section 155.420 of Title 45 of the Code of Federal Regulations with respect to health benefit plans offered through the Exchange.(4)This section does not require an association, or a trust established and maintained by an association to receive a master insurance policy issued by an admitted insurer and to administer the benefits thereof solely for association members, to offer, market, or sell a benefit plan design to those who are not members of the association. However, if the association markets, offers, or sells a benefit plan design to those who are not members of the association, it is subject to the requirements of this section. This section applies to an association that otherwise meets the requirements of paragraph (8) formed by merger of two or more associations after January 1, 1992, if the predecessor organizations had been in active existence on January 1, 1992, and for at least five years prior to that date and met the requirements of paragraph (5).(5)A carrier which (A) effective January 1, 1992, and at least 20 years that date, markets, offers, or sells benefit plan designs only to all members of one association and (B) does not market, offer, or sell any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits shall not be required to market, offer, or sell to those who are not members of the association. However, if the carrier markets, offers, or sells any benefit plan design or any other individual, selected group, or group policy or contract providing medical, hospital, and surgical benefits to those who are not members of the association, it is subject to the requirements of this section.(6)Each carrier that sells health benefit plans to members of one association pursuant to paragraph (5) shall submit an annual statement to the commissioner which states that the carrier is selling health benefit plans pursuant to paragraph (5) and which, for the one association, lists all the information required by paragraph (7).(7)Each carrier that sells health benefit plans to members of any association shall submit an annual statement to the commissioner which lists each association to which the carrier sells health benefit plans, the industry or profession which is served by the association, the associations membership criteria, a list of officers, the state in which the association is organized, and the site of its principal office.(8)For purposes of paragraphs (4) and (6), an association is a nonprofit organization composed of a group of individuals or employers who associate based solely on participation in a specified profession or industry, accepting for membership any individual or small employer meeting its membership criteria, which do not condition membership directly or indirectly on the health or claims history of any person, which uses membership dues solely for and in consideration of the membership and membership benefits, except that the amount of the dues shall not depend on whether the member applies for or purchases insurance offered by the association, which is organized and maintained in good faith for purposes unrelated to insurance, which has been in active existence on January 1, 1992, and at least five years before that date, which has a constitution and bylaws, or other analogous governing documents that provide for election of the governing board of the association by its members, which has contracted with one or more carriers to offer one or more health benefit plans to all individual members and small employer members in this state.(A)Health coverage through an association that is not related to employment shall be considered individual coverage. The status of each distinct member of an association shall determine whether that members association coverage is individual, small group, or large group health insurance coverage.(B)Notwithstanding subparagraph (A), an association of employers may offer a large group health insurance policy consistent with the Employee Retirement Income Security Act of 1974 (Public Law 93-406) (ERISA), as amended (29 U.S.C. Sec. 1001 et seq.), if all of the following requirements are met:(i)The association is headquartered in this state and is a multiple employer welfare arrangement (MEWA) as defined under Section 3(40) of ERISA (29 U.S.C. Sec. 1002(40)).(ii)The MEWA is fully insured as described in Section 514 of ERISA (29 U.S.C. Sec. 1144) and is a bona fide association or group of employers that may act as an employer under Section 3(5) of ERISA.(iii)The MEWA was established prior to March 23, 2010, and has been in continuous existence since that date, and offers a large group health insurance policy in connection with an employee welfare benefit plan under Section 3(1) of ERISA (29 U.S.C. Sec. 1002(1)).(iv)As of January 1, 2019, the large group health insurance policy offered to employees has continuously provided a level of coverage having an actuarial value equivalent to, or greater than, the platinum level of coverage, as described in Section 10112.295, that is available through the California Health Benefit Exchange established pursuant to Section 100500 of the Government Code, and the large group health insurance policy provides coverage for essential health benefits consistent with Section 10112.27 and any rules or regulations adopted pursuant to that section.(v)The large group health insurance policy includes coverage of employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding six months in duration, and who, in the course of that employment, are not covered by another group health insurance policy in which the employer participates. Employer members of the MEWA shall subsidize at least 51 percent of the cost of individual employee premiums of their employees.(vi)The large group health insurance policy offers only fully insured benefits through a health insurer or disability insurer licensed by the department. The benefits offered under the large group health insurance policy shall be considered fully insured only if the terms of the health insurance policy provide for benefits, the amount of all of which the department determines are guaranteed under a policy of insurance issued by an insurer licensed by the department.(vii)The number of total employees, including employees described in clause (v), employed by all participating employers in each year is at least 101 employees.(viii)The MEWA and participating employers have a genuine organizational relationship unrelated to the provision of health care benefits, and the MEWA existed prior to the establishment of the employee welfare benefit plan.(ix)The participating employers have a commonality of interests from being in the same line of business, unrelated to the provision of health care benefits, as demonstrated by membership in the same business league, as described in Section 501(c)(6) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(6)).(x)Membership in the MEWA is open solely to employers, including the MEWA as an employer, and participating member employers exercise control, either directly or indirectly, over the employer welfare benefit plan, the MEWA, and the large group health insurance policy, in form and in substance.(xi)The large group health insurance policy is treated as a single-risk-rated policy that is guaranteed issue and guaranteed renewable for employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health or claims of any person. An employer is not excluded from participating in a MEWA or offering the large group health insurance policy based on health status or claims of any employee or dependent.(xii)The MEWA files an application for registration with the department on or before June 1, 2022.(I)A MEWA that timely registers with the department and that is found to be in compliance with this subparagraph shall annually file evidence of ongoing compliance with this subparagraph with the department, in a form and manner set forth by the department.(II)Except as provided in clause (iii) of subparagraph (C), a MEWA that does not meet the requirements of subclause (I) shall be subject to the restrictions provided in subparagraph (A).(C)(i)On or after June 1, 2022, a health insurer shall not market, issue, amend, renew, or deliver large employer health insurance coverage to a MEWA that provides any benefit to a resident in this state unless the MEWA is registered with the department and is found to be in compliance with the requirements set forth in subparagraph (B) or unless the MEWA filed an application for registration pursuant to subparagraph (B) and the application is pending before the department. The department shall have the authority to determine compliance with the requirements set forth in subparagraph (B).(ii)The department may issue guidance to health insurers and MEWAs regarding registration and compliance with subparagraph (B). The 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).(iii)Subparagraph (B) does not apply to, or in any way affect, a self-funded or partially self-funded multiple employer welfare arrangement that is regulated pursuant to Article 4.7 (commencing with Section 742.20) of Chapter 1 of Part 2 of Division 1.(c)Each carrier shall make available to each small employer all health benefit plans that the carrier offers or sells to small employers or to associations that include small employers for plan years on or after January 1, 2014. Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.(d)Each carrier shall do all of the following:(1)Prepare a brochure that summarizes all of its health benefit plans and make this summary available to small employers, agents, and brokers upon request. The summary shall include for each plan information on benefits provided, a generic description of the manner in which services are provided, such as how access to providers is limited, benefit limitations, required copayments and deductibles, and a telephone number that can be called for more detailed benefit information. Carriers are required to keep the information contained in the brochure accurate and up to date, and, upon updating the brochure, send copies to agents and brokers representing the carrier. Any entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare a summary brochure which includes that benefit plan.(2)For each health benefit plan, prepare a more detailed evidence of coverage and make it available to small employers, agents, and brokers upon request. The evidence of coverage shall contain all information that a prudent buyer would need to be aware of in making selections of benefit plan designs. An entity that provides administrative services only with regard to a health benefit plan written or issued by another carrier shall not be required to prepare an evidence of coverage for that health benefit plan.(3)Provide copies of the current summary brochure to all agents or brokers who represent the carrier and, upon updating the brochure, send copies of the updated brochure to agents and brokers representing the carrier for the purpose of selling health benefit plans.(4)Notwithstanding subdivision (c) of Section 10753, for purposes of this subdivision, companies that are affiliated companies or that are eligible to file a consolidated income tax return shall be treated as one carrier.(e)Every agent or broker representing one or more carriers for the purpose of selling health benefit plans to small employers shall do all of the following:(1)When providing information on a health benefit plan to a small employer but making no specific recommendations on particular benefit plan designs:(A)Advise the small employer of the carriers obligation to sell to any small employer any of the health benefit plans it offers to small employers, consistent with PPACA, and provide them, upon request, with the actual rates that would be charged to that employer for a given health benefit plan.(B)Notify the small employer that the agent or broker will procure rate and benefit information for the small employer on any health benefit plan offered by a carrier for whom the agent or broker sells health benefit plans.(C)Notify the small employer that, upon request, the agent or broker will provide the small employer with the summary brochure required in paragraph (1) of subdivision (d) for any benefit plan design offered by a carrier whom the agent or broker represents.(D)Notify the small employer of the availability of coverage and the availability of tax credits for certain employers consistent with PPACA and state law, including any rules, regulations, or guidance issued in connection therewith.(2)When recommending a particular benefit plan design or designs, advise the small employer that, upon request, the agent will provide the small employer with the brochure required by paragraph (1) of subdivision (d) containing the benefit plan design or designs being recommended by the agent or broker.(3)Prior to filing an application for a small employer for a particular health benefit plan:(A)For each of the health benefit plans offered by the carrier whose health benefit plan the agent or broker is presenting, provide the small employer with the benefit summary required in paragraph (1) of subdivision (d) and the premium for that particular employer.(B)Notify the small employer that, upon request, the agent or broker will provide the small employer with an evidence of coverage brochure for each health benefit plan the carrier offers.(C)Obtain a signed statement from the small employer acknowledging that the small employer has received the disclosures required by this paragraph and Section 10753.16.(f)A carrier, agent, or broker shall not induce or otherwise encourage a small employer to separate or otherwise exclude an eligible employee from a health benefit plan which, in the case of an eligible employee meeting the definition in paragraph (1) of subdivision (f) of Section 10753, is provided in connection with the employees employment or which, in the case of an eligible employee as defined in paragraph (2) of subdivision (f) of Section 10753, is provided in connection with a guaranteed association.(g)A carrier shall not reject an application from a small employer for a health benefit plan provided:(1)The small employer as defined by subparagraph (A) of paragraph (1) of subdivision (q) of Section 10753 offers health benefits to 100 percent of its eligible employees as defined in paragraph (1) of subdivision (f) of Section 10753. Employees who waive coverage on the grounds that they have other group coverage shall not be counted as eligible employees.(2)The small employer agrees to make the required premium payments.(h)(1)A carrier or agent or broker shall not, directly or indirectly, engage in the following activities:(A)Encourage or direct small employers to refrain from filing an application for coverage with a carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.(B)Encourage or direct small employers to seek coverage from another carrier because of the health status, claims experience, industry, occupation, or geographic location within the carriers approved service area of the small employer or the small employers employees.(C)Employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs or discriminate based on the individuals 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.(2)This subdivision shall be enforced in the same manner as Section 790.03, including through Sections 790.035 and 790.05.(i)A carrier shall not, directly or indirectly, enter into any contract, agreement, or arrangement with an agent or broker that provides for or results in the compensation paid to an agent or broker for a health benefit plan to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer or the small employers employees. This subdivision shall not apply with respect to a compensation arrangement that provides compensation to an agent or broker on the basis of percentage of premium, provided that the percentage shall not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.(j)(1)A health benefit plan offered to a small employer, as defined in subsection (b) of Section 1304 of PPACA and in Section 10753, shall 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:(A)Health status.(B)Medical condition, including physical and mental illnesses.(C)Claims experience.(D)Receipt of health care.(E)Medical history.(F)Genetic information.(G)Evidence of insurability, including conditions arising out of acts of domestic violence.(H)Disability.(I)Any other health status-related factor as determined by any federal regulations, rules, or guidance issued pursuant to Section 2705 of the federal Public Health Service Act.(2)Notwithstanding Section 10291.5, a carrier shall not require an eligible employee or dependent to fill out a health assessment or medical questionnaire before enrollment under a health benefit plan. A carrier shall not acquire or request information that relates to a health status-related factor from the applicant or the applicants dependent or any other source before enrollment of the individual.(k)(1)A carrier shall consider as a single-risk pool for rating purposes in the small employer market the claims experience of all insureds in all nongrandfathered small employer health benefit plans offered by the carrier in this state, whether offered as health care service plan contracts or health insurance policies, including those insureds and enrollees who enroll in coverage through the Exchange and insureds and enrollees covered by the carrier outside of the Exchange.(2)At least each calendar year, and no more frequently than each calendar quarter, a carrier shall establish an index rate for the small employer market in the state based on the total combined claims costs for providing essential health benefits, as defined pursuant to Section 1302 of PPACA and Section 10112.27, within the single-risk pool required under paragraph (1). The index rate shall be adjusted on a marketwide basis based on the total expected marketwide payments and charges under the risk adjustment program established for the state pursuant to Section 1343 of PPACA and Exchange user fees, as described in subdivision (d) of Section 156.80 of Title 45 of the Code of Federal Regulations. The premium rate for all of the nongrandfathered health benefit plans within the single-risk pool required under paragraph (1) shall use the applicable marketwide adjusted index rate, subject only to the adjustments permitted under paragraph (3).(3)A carrier may vary premium rates for a particular nongrandfathered health benefit plan from its index rate based only on the following actuarially justified plan-specific factors:(A)The actuarial value and cost-sharing design of the health benefit plan.(B)The health benefit plans provider network, delivery system characteristics, and utilization management practices.(C)The benefits provided under the health benefit plan that are in addition to the essential health benefits, as defined pursuant to Section 1302 of PPACA. These additional benefits shall be pooled with similar benefits within the single-risk pool required under paragraph (1) and the claims experience from those benefits shall be utilized to determine rate variations for health benefit plans that offer those benefits in addition to essential health benefits.(D)Administrative costs, excluding any user fees required by the Exchange.(E)With respect to catastrophic plans, as described in subsection (e) of Section 1302 of PPACA, the expected impact of the specific eligibility categories for those plans.(l)If a carrier enters into a contract, agreement, or other arrangement with a third-party administrator or other entity to provide administrative, marketing, or other services related to the offering of health benefit plans to small employers in this state, the third-party administrator shall be subject to this chapter.(m)This section shall become operative on January 1, 2026.SEC. 5.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
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Date
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Status
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|---|---|
| Sep 22, 2024 | Chaptered by Secretary of State - Chapter 374, Statutes of 2024. |
| Sep 22, 2024 | Approved by the Governor. |
| Sep 10, 2024 | Enrolled and presented to the Governor at 4:30 p.m. |
| Aug 28, 2024 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 77. Noes 0.). |
| Aug 28, 2024 | In Assembly. Concurrence in Senate amendments pending. May be considered on or after August 30 pursuant to Assembly Rule 77. |
| Aug 28, 2024 | Assembly Rule 77 suspended. |
| Aug 27, 2024 | Read third time. Passed. Ordered to the Assembly. (Ayes 39. Noes 0.). |
| Aug 19, 2024 | Read second time. Ordered to third reading. |
| Aug 15, 2024 | From committee: Do pass. (Ayes 6. Noes 0.) (August 15). |
| Aug 5, 2024 | In committee: Referred to APPR suspense file. |
| Jul 3, 2024 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR with recommendation: To Consent Calendar. (Ayes 11. Noes 0.) (July 3). |
| Jul 3, 2024 | Read second time and amended. Re-referred to Com. on APPR. |
| May 22, 2024 | Referred to Com. on HEALTH. |
| May 9, 2024 | In Senate. Read first time. To Com. on RLS. for assignment. |
| May 9, 2024 | Read third time. Passed. Ordered to the Senate. (Ayes 65. Noes 0. Page 5158.) |
| May 2, 2024 | Read second time. Ordered to Consent Calendar. |
| May 1, 2024 | From committee: Do pass. To Consent Calendar. (Ayes 14. Noes 0.) (May 1). |
| Apr 22, 2024 | Re-referred to Com. on APPR. |
| Apr 18, 2024 | Read second time and amended. |
| Apr 17, 2024 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. with recommendation: To Consent Calendar. (Ayes 16. Noes 0.) (April 16). |
| Feb 20, 2024 | Referred to Com. on HEALTH. |
| Feb 6, 2024 | From printer. May be heard in committee March 7. |
| Feb 5, 2024 | Read first time. To print. |
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Date
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Description
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Location
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Votes
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|
|---|---|---|---|---|
| Aug 28, 2024 | AB 2072 Weber Concurrence in Senate Amendments | Assembly Floor |
Passed |
|
| Aug 27, 2024 | Assembly 3rd Reading AB2072 Weber et al. By Atkins | Senate Floor |
Passed |
|
| Aug 15, 2024 | Do pass | Senate Standing Committee on Appropriations |
Passed |
|
| Aug 5, 2024 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
|
| Jul 3, 2024 | Do pass as amended, but first amend, and re-refer to the Committee on [Appropriations] with the recommendation: To Consent Calendar | Senate Standing Committee on Health |
Passed |
|
| May 9, 2024 | AB 2072 Weber Consent Calendar Second Day Regular Session | Assembly Floor |
Passed |
|
| May 1, 2024 | Do pass. To Consent Calendar. | Assembly Standing Committee on Appropriations |
Passed |
|
| Apr 16, 2024 | Do pass as amended, and be re-referred to the Committee on [Appropriations] with recommendation: To Consent Calendar | Assembly Standing Committee on Health |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
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Organization
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Position
|
Date
|
|---|---|---|
| Biocom California | ** Support | |
| California Small Manufacturers Trust | ** Support |
CONCURRENCE IN SENATE AMENDMENTS
CSA1 Bill Id:AB 2072
Author:(Weber)
As Amended Ver:July 3, 2024
Majority vote
SUMMARY
Extends the sunset in existing law to January 1, 2030, for the authorization of an association of employers to offer a large group health plan or insurance policy to small group employer members of the association consistent with the federal Employee Retirement Income Security Act of 1974 (ERISA), including that the association is a sponsor of a multiple employer welfare arrangements (MEWAs), and who are employed by an association member in the biomedical industry with operations in California. Requires the Department of Managed Health Care (DMHC) or California Department of Insurance (CDI) to conduct an analysis of the impacts on the small employer health insurance market in California of health insurers currently issuing large group policies to small employers through MEWAs.
Senate Amendments
Require the DMHC and CDI to conduct an analysis of the impacts on the small employer health insurance market in California. Allows the DMHC and CDI to coordinate. Allows the departments to contract with a consultant with expertise to assist in its analysis. Revise the sunset date from 2033 to 2030.
COMMENTS
- Association Health Plans (AHPs). The California Health Care Foundation (CHCF) in a March 2021 Issue Brief writes that under federal law, AHPs are a type of MEWA established or maintained to provide insurance coverage for medical, surgical, hospital care, or other benefits in the event of sickness. AHPs are insurance arrangements that allow small businesses, associations, and self-employed workers to organize together to purchase health care coverage, potentially obtaining lower-priced coverage by spreading risk and negotiating on behalf of a larger set of enrollees. AHPs have long been offered and regulated in the state of California. California law established requirements for small group reform that applied to AHPs, including criteria for guaranteed issue, standard rating rules, defined risk corridors, specific age bands, and the number of geographic regions for the small group insurance market. In 2010, the federal Patient Protection and Affordable Care Act (ACA) changed the rating rules and benefit coverage requirements in the individual and small group markets, and led to the establishment of Covered California. Through Covered California, individuals and employees of participating small businesses can enroll in subsidized and unsubsidized health coverage.
In 2018, according to CHCF, efforts to unwind key provisions of the ACA included the U.S. Department of Labor (DOL) new regulation for AHPs that made it easier for small employers to organize for the purpose of accessing health insurance typically available only to large groups. Proponents of the DOL rule argued that AHPs promote competition in increasingly consolidated insurance markets and provide more affordable options in the face of ever-escalating and unaffordable health insurance premiums. By allowing a more restrictive benefit design, such plans could also be attractive to small groups with a lower-risk profile. Such groups could design products that do not cover the essential health benefits (EHBs) as required for individual and small group plans under the ACA but instead comply with less stringent ERISA consumer protections. Opponents of the DOL rule argued that such plans would create adverse selection by driving higher-risk individuals into the state or federal health insurance marketplace options, increasing costs and ultimately undermining the stability of those risk pools. Premiums for the small group market are determined by a community rating methodology whereby the claims experience across the small group segment is pooled to determine health insurance premiums and annual rate increases.
According to a January 2018 paper authored by the Center on Health Insurance Reforms at Georgetown University, the primary purpose of the DOL rule is to allow more groups of small businesses and self-employed individuals to form AHPs so that they can offer coverage that is regulated under federal law as large-group coverage, and avoid ACA requirements such as EHBs, premium rating restrictions, the single risk pool requirement and risk adjustment. At that time, an analysis by Avalere Health indicated that individual and small group markets would see premiums rise, over a five-year period, 2.7% to 4% in the individual market and .1% to 1.9% in the small group market relative to current law because healthier enrollees would shift into AHPs. Avalere estimated 2.4 million to 4.3 million would switch to AHPs. In 2018, Covered California released a report indicating that this policy change along with another one related to short-term policies could cause an increase in premiums in 2019 of 0.3% to 1.3%. Together with the elimination of the individual mandate penalties (it should be noted that California subsequently enacted a state individual mandate), premium costs could go up by 12% to 32% in total in 2019.
- SB 1375. In response to the 2018 DOL rule, California enacted SB 1375, Chapter 700, Statutes of 2018, to prohibit fully-insured MEWA from selling large group coverage to small employers. SB 1375 protects the state's individual and small group markets from potential adverse selection by specifying that the status of each distinct member of an association determines whether that member's association coverage is individual, small group, or large group health coverage. In other words, if a member in the association is a small group, then the member would need to meet existing small group requirements in California law (i.e., small group premium rating restrictions).
The DMHC issued a 2019 All Plan Letter to remind health plans, solicitors, brokers and others that in California, group coverage may not be sold to individual subscribers directly or "indirectly through any arrangement." California law significantly limits the extent to which employers and individuals may join together to purchase health care coverage as an association. As such, notwithstanding the DOL rule, individuals (including sole proprietors without employees) may purchase individual coverage only, regardless of whether they are in an association. Similarly, small employers may purchase small group coverage only, regardless of whether that coverage is sold through an association.
- SB 1375 Exemptions. In 2021, two bills were enacted to create two narrow exceptions to the general rule in SB 1375 that plans are barred from selling large group coverage to small employers and individuals through a MEWA. SB 255 (Portantino), Chapter 725, Statutes of 2021, exempts one MEWA that provides health coverage for freelance filming crews in the television commercial production industry. Eligibility requirements of the large group contract is required to provide coverage for employees and their dependents, who are employed in designated job categories on a project-by-project basis for one or more employers with no single project exceeding six months in duration. SB 718 (Bates), Chapter 736, Statutes of 2021, exempts a MEWA that provides health coverage for individuals in the biomedical industry. SB 718 requires the large group health plan to include coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California. The provisions related to SB 718 will sunset on January 1, 2026. This bill extends the sunset in SB 718.
- Recent Proposed Federal Rule. Late last year, the DOL issued a proposed rule that would rescind the 2018 DOL rule designed to expand the formation and use of AHPs. According to a recent Health Affairs article, in the preamble to its proposed rule, DOL describes its "extensive experience" with unscrupulous promoters and operators of MEWAs. Compared to traditional health insurers, MEWAs have disproportionately suffered from financial mismanagement and abuse, leaving enrollees and providers with significant financial liabilities. Under ERISA, an association can only sponsor an employee health benefit plan when it is acting as an employer. Such plans can only be offered through genuine employment-based arrangements. In its proposed rule, DOL argues that the 2018 DOL rule loosening the business purpose, commonality of interest, and working owner standards do not align with the text and intent of ERISA. The agency also notes that the 2018 DOL rule would have increased adverse selection in the individual and small-group insurance markets. DOL further notes that the 2018 DOL rule would have enabled AHPs to offer coverage not subject to the ACA's EHB standard, enabling them to offer only "skinny" plans that leave workers underinsured. These federal rules are pending.
According to the Author
This bill is critical for small biomedical companies to attract top talent in a very competitive labor market. It continues to allow small life science companies to join together in a fully insured multiple-employer agreement (as allowed by ERISA) under specified conditions, including that benefits offered must be actuarially equivalent to the platinum level of the California Health Benefit Exchange. The plan also must be offered through an insurance carrier licensed by the State. The author concludes that this bill allows small emerging companies to compete with global biopharmaceutical or medical device companies for talent by not asking an employee to sacrifice quality of health coverage for the opportunity to work at a small, innovative company, the very companies that are fueling California's expanding economy.
Arguments in Support
Biocom California, sponsor of this bill, writes that Biocom California established a health plan trust, specifically for its small and medium sized life science companies. Biocom works on behalf of more than 1,700 members. The plan's benefits are high-quality and are available to not just the most experienced scientists but to all qualified employees of an enrolled company – including entry-level clerks and administrative assistants. SB 718 was introduced in 2021 because the biomedical industry's high-quality health plan was swept into the DMHC's regulatory action to reign in lower-quality health plans pursuant to prior legislation. The safeguards included in the 2021 bill have proven effective – the health plan trust has remained stable, it has not resulted in significant flight from the small employer group market, while still providing cost-effective, high-quality health insurance to small life science companies and their employees. Given this, this bill removes the January 1, 2026 sunset date so that the members of the biomedical small employer health plan trust can continue to offer its health plan to its employees. Without the certainty of knowing that their health plan will continue to exist past 2025, due to the sunset included in SB 718, it is difficult for small and medium sized biomedical companies to properly plan. Most small biomedical companies operate on extremely thin margins, making certainty of affordable, high-quality care in the long term critical to their success.
Arguments in Opposition
There is no known registered opposition to this bill.
FISCAL COMMENTS
According to the Senate Appropriations Committee, the DMHC estimates consulting costs of $500,000 in 2025-26 to conduct the small group market impact analysis (Managed Care Fund).
The CDI estimates costs of $22,000 in 2024-25, $44,000 in 2025-26, and $29,000 in 2031-32 for state administration (Insurance Fund).
VOTES:
ASM HEALTH: 16-0-0
YES: Bonta, Waldron, Aguiar-Curry, Arambula, Wendy Carrillo, Flora, Haney, Jones-Sawyer, Maienschein, McCarty, Joe Patterson, Rodriguez, Sanchez, Santiago, Schiavo, Weber
ASM APPROPRIATIONS: 14-0-1
YES: Wicks, Sanchez, Arambula, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Grayson, Haney, Hart, Pellerin, Ta, Villapudua
ABS, ABST OR NV: Jim Patterson
ASSEMBLY FLOOR: 65-0-15
YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Davies, Dixon, Essayli, Mike Fong, Vince Fong, Friedman, Gallagher, Garcia, Gipson, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Quirk-Silva, Ramos, Rendon, Reyes, Rodriguez, Blanca Rubio, Sanchez, Santiago, Soria, Ta, Valencia, Villapudua, Waldron, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas
ABS, ABST OR NV: Bains, Cervantes, Megan Dahle, Flora, Gabriel, Grayson, Haney, Low, Mathis, Stephanie Nguyen, Petrie-Norris, Luz Rivas, Schiavo, Ting, Wallis
SENATE FLOOR: 40-0-0
YES: Allen, Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk
UPDATED
VERSION: July 3, 2024
CONSULTANT: Kristene Mapile / HEALTH / (916) 319-2097 FN: 0004139
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB 2072 |
THIRD READING
Bill No: AB 2072
Author: Weber (D), et al.
Amended: 7/3/24 in Senate
Vote: 21
SENATE HEALTH COMMITTEE: 11-0, 7/3/24
AYES: Roth, Nguyen, Glazer, Gonzalez, Grove, Hurtado, Limón, Menjivar, Rubio, Smallwood-Cuevas, Wiener
SENATE APPROPRIATIONS COMMITTEE: 6-0, 8/15/24
AYES: Caballero, Jones, Ashby, Becker, Seyarto, Wahab
NO VOTE RECORDED: Bradford
ASSEMBLY FLOOR: 65-0, 5/9/24 (Consent) - See last page for vote
SUBJECT: Group health care coverage: biomedical industry
SOURCE: Biocom California
DIGEST:
This bill extends the authority for an association of employers that sponsors a fully insured multiple employee welfare arrangement (MEWA) that registered with the Department of Managed Health Care (DMHC) or California Department of Insurance (CDI) on or before June 1, 2022 to offer large group plan contracts to small employer members employed in the biomedical industry in California, from January 1, 2026, to January 1, 2030. This bill requires on or before June 30, 2026, DMHC and CDI to provide information filings to the Legislature, and to conduct an analysis of the impacts on the small group health insurance market in California and post a report summarizing findings no later than July 1, 2026.
ANALYSIS:
Existing law:
- Establishes the DMHC to regulate health plans and the CDI to regulate health insurance. [Health and Safety Code (HSC) §1340, et seq. and Insurance Code (INS) §106, et seq.]
- Establishes rules for small group health plan contracts and health insurance policies that were in existence prior to the passage of the Affordable Care Act (ACA), referred to as grandfathered small employer health plans and health insurance policies. [HSC §1357.600, et seq. and INS §10755, et seq.]
- Establishes rules for small group health plan contracts and health insurance policies to meet requirements of the ACA governed by nongrandfathered small employer requirements. [HSC §1357.500, et seq. and INS §10753, et seq.]
- Requires the status of each distinct member of an association to determine whether that member’s association coverage is individual, small group, or large group health coverage. [HSC §1357.503 and INS §10753.05]
- Permits until January 1, 2026 an association of employers to offer a large group health plan contract or health insurance policy to small group employer members of the association, consistent with the federal Employee Retirement Income Security Act of 1974 (ERISA), if specified requirements are met such as:
- The association is headquartered in California, was established prior to March 23, 2010, has been in continued existence since, and is a bona fide association or group of employers that may act as an employer under ERISA. The association is the sponsor of a MEWA, and the MEWA is fully insured, headquartered in California, and is in full compliance with all applicable state and federal laws;
- The large group health plan contract or health insurance includes coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California; and,
- The association and MEWA files an application for registration with the DMHC or CDI on or before June 1, 2022.
- Prohibits, on or after January 1, 2022, a health plan or health insurer from marketing, issuing, amending, renewing, or delivering large employer health care coverage to a MEWA that provides any benefit to a resident of California unless the MEWA is registered and complies with 5) above, or has an application pending. Requires DMHC or CDI to determine whether the MEWA is in compliance. [HSC §1357.503 and INS §10753.05]
This bill:
- Extends from January 1, 2026, to January 1, 2030, the authority for an association of employers that sponsors a fully insured MEWA and CDI that registered with DMHC on or before June 1, 2022 to offer large group plan contracts to small employer members employed in the biomedical industry in California.
- Requires on or before June 30, 2026, DMHC and CDI to provide the health policy committees of the Legislature the most recent filings, as specified.
- Requires DMHC and CDI to conduct an analysis of the impacts on the small employer health insurance market in California of health plans and health insurers currently issuing large group contracts and policies to small employers through MEWAs. The analysis is to determine the extent to which coverage of Californians in existing MEWAs has any detrimental impacts on the affordability of and access to small group health insurance for small businesses in California who do not purchase health insurance through a MEWA. Permits coordination between the two departments. Requires compliance with requests for information. Requires DMHC and CDI to post a report summarizing its analysis on or before July 1, 2026. Permits DMHC and CDI to contract with experts to assist with the analysis.
Comments
- Author’s statement. According to the author, this bill is critical for small biomedical companies to attract top talent in a very competitive labor market. It continues to allow small life science companies to join together in a fully insured multiple-employer agreement (as allowed by ERISA) under specified conditions, including that benefits offered must be actuarially equivalent to the platinum level of the California Health Benefit Exchange. The plan also must be offered through an insurance carrier licensed by the State. This allows small emerging companies to compete with global biopharmaceutical or medical device companies for talent by not asking an employee to sacrifice quality of health coverage for the opportunity to work at a small, innovative company, the very companies that are fueling California’s expanding economy.
- Look-through. SB 1375 (Hernandez, Chapter 700, Statutes of 2018) was intended to make California law clear and consistent with the federal ACA rules even if individuals or small employers join together in an association by codifying long standing federal look-through policy.
- DMHC All Plan Letter (APL). On December 9, 2019, DMHC issued APL 19-024, reminding health plans, solicitors, brokers and others that in California, that group coverage may not be sold to individual subscribers directly or “indirectly through any arrangement.” Likewise, large group coverage may not be sold to small employers through MEWAs, Association Health Plans (AHPs), voluntary employees’ beneficiary associations (VEBAs) or any similar arrangements (collectively “associations”). California law significantly limits the extent to which employers and individuals may join together to purchase health care coverage as an association. Due to the COVID-19 state of emergency, on May 5, 2020, the DMHC issued APL 20-019 to extend the end of the phase-out period through October 31, 2020. On August 21, 2020, DMHC extended the end of the phase-out period through February 28, 2021. On March 24, 2022, DMHC issued APL 22-012 describing the narrow exemption created to the law with the passage of SB 255 (Chapter 725, Statues of 2021 and SB 718 (Chapter 736, Statutes of 2021).. This APL required compliance filings to be submitted on or before April 15, 2022 and reminded plans that MEWA registration is required by June 1, 2022. Requirements for submission and filings were detailed in the APL. On April 20, 2023 DMHC issued APL 23-013 in which DMHC recognized that some health plans and MEWAs continue to renew large group coverage while DMHC was reviewing compliance submissions for SB 255 and SB 718. As such plans contracting with MEWAs were permitted to continue to renew for up to one year until December 31, 2023, if the health plan submitted specified information on or before May 19, 2023. The APL also exempted Taft-Hartley and Davis-Bacon Trusts from SB 1375.
- Why limit MEWAs? An Urban Institute report indicates experts have raised concerns about AHPs claiming large group status because of the potential for adverse selection and increased premiums when different regulatory frameworks exist for the same type of health plan purchaser. Health insurers are generally allowed to adjust premiums based on health status and other permissible factors that apply to the large group market, small employers with younger, healthier employees may find more competitive premiums under plans regulated under large group rules. Small employer groups with higher risk profiles have less incentive to purchase through AHPs because they would be exposed to higher premiums and larger rate increases. Over time, if healthy groups gravitate to association coverage, this could subsequently lead to market segmentation and adverse selection in the plans sold through the small group market, including through market places such as Covered California, and the small group market outside of Covered California which is substantially larger than the Covered California small group market place.
- MEWA Expansion. Under the Trump Administration, regulatory efforts were attempted to broaden the criteria for determining when employers may join together in an employer group or association that is treated as the employer sponsor of single multiple-employer welfare benefit plans. The rules were challenged and not implemented and have been repealed under the Biden Administration, but actuary analysis at the time, indicated that the policy would cause premiums to rise in the individual and small group insurance markets over time. Additionally, California regulators raised concerns over the impacts to California’s insurance markets.
- Enforcement issues. At both the federal and state level monitoring and enforcement of AHP/MEWAs has been challenging. In comments responding to the Trump Administration rule, some raised concerns about minimal oversight by Department of Labor. In California, with regard to fully insured MEWAs, three have registered at DMHC, including the sponsor of this bill, Biocom California, which established Beyond Benefits Life Science Association. However, many more have been reported on both CDI and DMHC websites. In addition, the approximately 150,000 individuals covered through these arrangements in 2019 has grown to over 200,000 in a four-year period.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes
According to the Senate Appropriations Committee, the DMHC estimates consulting costs of $500,000 in 2025-26 to conduct the small group market impact analysis (Managed Care Fund). The CDI estimates costs of $22,000 in 2024-25, $44,000 in 2025-26, and $29,000 in 2031-32 for state administration (Insurance Fund).
SUPPORT: (Verified 8/14/24)
Biocom California (source)
California Small Manufacturers Trust
OPPOSITION: (Verified 8/14/24)
None received
ARGUMENTS IN SUPPORT: Biocom California writes that in 2021, it sponsored SB 718 which statutorily authorized a successful “AHP” that had been in existence for more than a decade. Small life science companies must compete with the larger companies for talent at all levels. Because they operate in a highly competitive labor market, they must offer high quality, affordable health benefit plans to ensure they are able to attract and retain top-quality talent. To address this need, Biocom California established a health plan trust, specifically for its small and medium sized life science companies. The plan’s benefits are high quality and are available to not just the most experienced scientists but to all qualified employees of an enrolled company – including entry-level clerks and administrative assistants. SB 718 was introduced in 2021 because the biomedical industry’s high-quality health plan was swept into the DMHC’s regulatory action to reign in lower-quality health plans (known as MEWAs) pursuant to prior legislation. That same year, SB 255 was also introduced to provide the same statutory authority for the Producer’s Health Benefits Plan, a MEWA that provides health benefits to certain members of the entertainment industry. The safeguards included in the 2021 bill have proven effective – the health plan trust has remained stable, it has not resulted in significant flight from the small employer group market, while still providing cost-effective, high-quality health insurance to small life science companies and their employees. Given this, this bill updates the sunset date so that the members of the biomedical small employer health plan trust can continue to offer its health plan to its employees. Without the certainty of knowing that their health plan will continue to exist past 2025, due to the sunset included in SB 718, it is difficult for small and medium sized biomedical companies to properly plan. The California Small Manufacturers Trust, whose participants include biomedical manufacturing companies, support this bill because it will enable the California Small Manufacturers Trust to continue to offer its health plan to its over 2,500 employees, which it has been doing since 2011.
ASSEMBLY FLOOR: 65-0, 5/9/24
AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Davies, Dixon, Essayli, Mike Fong, Vince Fong, Friedman, Gallagher, Garcia, Gipson, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Quirk-Silva, Ramos, Rendon, Reyes, Rodriguez, Blanca Rubio, Sanchez, Santiago, Soria, Ta, Valencia, Villapudua, Waldron, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas
NO VOTE RECORDED: Bains, Cervantes, Megan Dahle, Flora, Gabriel, Grayson, Haney, Low, Mathis, Stephanie Nguyen, Petrie-Norris, Luz Rivas, Schiavo, Ting, Wallis
Prepared by: Teri Boughton / HEALTH / (916) 651-4111
8/18/24 8:51:22
**** END ****
SENATE COMMITTEE ON
Senator Anna Caballero, Chair
2023 - 2024 Regular Session
AB 2072 (Weber) - Group health care coverage: biomedical industry
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: | Consultant: |
Bill Summary:
AB 2072 would extend authority for an association of employers in the biomedical industry to offer a large group health plan contract or health insurance policy to small group employer members of the association, as specified.
Fiscal Impact:
- The Department of Managed Health Care (DMHC) estimates consulting costs of $500,000 in 2025-26 to conduct the small group market impact analysis (Managed Care Fund).
- The California Department of Insurance (CDI) estimates costs of $22,000 in 2024-25, $44,000 in 2025-26, and $29,000 in 2031-32 for state administration (Insurance Fund).
Background:
The DMHC regulates health plans under the Knox-Keene Act and the CDI regulates health insurance. Current law prohibits, on or after January 1, 2022, a health plan or health insurer from marketing, issuing, amending, renewing, or delivering large employer health care coverage to a multiple employer welfare arrangement (MEWA) that provides any benefit to a resident of California unless the MEWA is registered and complies with the provisions below, or has an application pending.
Current law permits until January 1, 2026 an association of employers to offer a large group health plan contract or health insurance policy to small group employer members of the association, consistent with the federal Employee Retirement Income Security Act of 1974 (ERISA), if specified requirements are met such as:
- The association is headquartered in California, was established prior to March 23, 2010, has been in continued existence since, and is a bona fide association or group of employers that may act as an employer under ERISA;
- The association is the sponsor of a MEWA, and the MEWA is fully insured, headquartered in California, and is in full compliance with all applicable state and federal laws;
- The MEWA has offered a large group health plan contract or health insurance policy since January 1, 2012, in connection with an employee welfare benefit plan;
- The large group health plan contract or health insurance policy offers to employees a level of coverage having an actuarial value greater than or equivalent to the platinum level of coverage available through Covered California and covers essential health benefits, as specified;
- The large group health plan contract or health insurance policy includes coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California;
- The association and MEWA file applications for registration with the DMHC or CDI on or before June 1, 2022;
- The association and MEWA that are found to be in compliance to annually file evidence of ongoing compliance with the DMHC or CDI.
Proposed Law:
Specific provisions of the bill would:
- Require DMHC and CDI, on or before June 30, 2026, to provide the health policy committees of the Legislature the most recent filings related to evidence of ongoing compliance.
- Require DMHC and CDI to conduct an analysis of the impacts on the small employer health insurance market in California of health plans/insurers currently issuing large group contracts/policies to small employers through MEWAs.
- Extend authority for an association of employers to offer a large group health plan contract or health insurance policy to small group employer members of the association, described above, from until January 1, 2026 to until January 1, 2030.
Related Legislation:
AB 2434 (Grayson) would authorize an association of employers in the engineering, surveying, or design industry to offer a large group health plan contract to small group employer members of the association, as specified. The bill is scheduled to be heard August 5, 2024 in this committee.
-- END --
SENATE COMMITTEE ON HEALTH
Senator Richard Roth, Chair
BILL NO: AB 2072
AUTHOR: | Weber | ||
VERSION: | April 18, 2024 | ||
HEARING DATE: | July 3, 2024 | ||
CONSULTANT: | Teri Boughton | ||
SUBJECT: Group health care coverage: biomedical industry
SUMMARY:
- Extends the authority for an association of employers that sponsors a fully insured multiple employee welfare arrangement (MEWA) that registered with DMHC on or before June 1, 2022 to offer large group plan contracts to small employer members employed in the biomedical industry in California from January 1, 2026, to January 1, 2033. Requires on or before June 30, 2032, the Department of Managed Health Care (DMHC) to provide the health policy committees of the Legislature required filings, and to provide a recommendation to the Legislature as to whether any MEWAs that have registered with DMHC should cease to be operative or whether they should remain operative based on compliance with the law.
Existing law:
- Establishes the Department of Managed Health Care (DMHC) to regulate health plans and the California Department of Insurance (CDI) to regulate health insurance. [HSC §1340, et seq. and INS §106, et seq.]
- Establishes rules for small group health plan contracts and health insurance policies that were in existence prior to the passage of the Affordable Care Act (ACA), referred to as grandfathered small employer health plans and health insurance policies. [HSC §1357.600, et seq. and INS §10755, et seq.]
- Establishes rules for small group health plan contracts and health insurance policies to meet requirements of the ACA governed by nongrandfathered small employer requirements. [HSC §1357.500, et seq. and INS §10753, et seq.]
- Requires the status of each distinct member of an association to determine whether that member’s association coverage is individual, small group, or large group health coverage. [HSC §1357.503 and INS §10753.05]
- Permits until January 1, 2026 an association of employers to offer a large group health plan contract or health insurance policy to small group employer members of the association, consistent with the federal Employee Retirement Income Security Act of 1974 (ERISA), if specified requirements are met such as:
- The association is headquartered in California, was established prior to March 23, 2010, has been in continued existence since, and is a bona fide association or group of employers that may act as an employer under ERISA. The association is the sponsor of a MEWA, and the MEWA is fully insured, headquartered in California, and is in full compliance with all applicable state and federal laws;
- The MEWA has offered a large group health plan contract or health insurance policy since January 1, 2012, in connection with an employee welfare benefit plan;
- The large group health plan contract or health insurance policy offers to employees a level of coverage having an actuarial value greater than or equivalent to the platinum level of coverage available through Covered California and covers essential health benefits, as specified;
- The large group health plan contract or health insurance includes coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California;
- The association and MEWA files an application for registration with the DMHC or CDI on or before June 1, 2022; and,
- Requires an association and MEWA that timely registers and is found to be in compliance to annually file evidence of ongoing compliance or has applications pending.
- Prohibits, on or after January 1, 2022, a health plan or health insurer from marketing, issuing, amending, renewing, or delivering large employer health care coverage to a MEWA that provides any benefit to a resident of California unless the MEWA is registered and complies with 5) above, or has an application pending. Requires DMHC or CDI to determine whether the MEWA is in compliance. [HSC §1357.503 and INS §10753.05]
- Establishes the Office of Health Care Affordability (OHCA) in the Department of Health Care Access and Information (HCAI), which is responsible for analyzing the health care market for cost trends and drivers of spending, developing data-informed policies for lowering health care costs for consumers and purchasers, creating a state strategy for controlling the cost of health care and ensuring affordability for consumers and purchasers, and enforcing cost targets. [HSC §127501]
- Requires OHCA to review and evaluate the impact of consolidation, market power, and other market failures through cost and market impact reviews of mergers, acquisitions, or corporate affiliations involving health plans, health insurers, hospitals, physician organizations, pharmacy benefit managers, and other health care entities. [HSC §127507]
- Requires OHCA to monitor cost trends, including conducting research and studies on the health care market, including, but not limited to, the impact of consolidation, market power, venture capital activity, profit margins, and other market failures on competition, prices, access, quality, and equity. [HSC §127507]
This bill:
- Extends from January 1, 2026, to January 1, 2033, the authority for an association of employers that sponsors a fully insured MEWA and CDI that registered with DMHC on or before June 1, 2022 to offer large group plan contracts to small employer members employed in the biomedical industry in California.
- Requires on or before June 30, 2032, DMHC to provide the health policy committees of the Legislature the most recent filings, as specified and to provide a recommendation to the Legislature as to whether any MEWAs that have registered with DMHC and CDI should cease to be operative or whether they should remain operative based on compliance with the law.
FISCAL EFFECT:
According to the Assembly Appropriations Committee, minor and absorbable costs to DMHC and CDI.
PRIOR VOTES:
Assembly Floor: | 65 - 0 |
Assembly Appropriations Committee: | 14 - 0 |
Assembly Health Committee: | 16 - 0 |
COMMENTS:
- Author’s statement. According to the author, this bill is critical for small biomedical companies to attract top talent in a very competitive labor market. It continues to allow small life science companies to join together in a fully insured multiple-employer agreement (as allowed by ERISA) under specified conditions, including that benefits offered must be actuarially equivalent to the platinum level of the California Health Benefit Exchange. The plan also must be offered through an insurance carrier licensed by the State. This allows small emerging companies to compete with global biopharmaceutical or medical device companies for talent by not asking an employee to sacrifice quality of health coverage for the opportunity to work at a small, innovative company, the very companies that are fueling California’s expanding economy.
- Look-through. SB 1375 (Hernandez, Chapter 700, Statutes of 2018) was intended to make California law clear and consistent with the federal ACA rules even if individuals or small employers join together in an association by codifying long standing federal look-through policy. As indicated in a 2011 Centers for Medicare & Medicaid Services (CMS) Information Bulletin, although the ACA revised the Public Health Services (PHS) Act, it did not modify the underlying PHS Act framework for determining whether health insurance coverage issued through associations was individual or group health insurance coverage. The analysis set forth since August 2002 remains authoritative for determining when association coverage is considered individual or group coverage. The PHS Act derives its definition of group health plan and employer from the ERISA definitions of employee welfare benefit plan and employer. Under ERISA, an employer is “any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity.” ERISA is relied upon in establishing the existence of a group health plan and determining the identity of the “employer” sponsoring the plan. The size of each individual employer participating in the association determines whether that employer’s coverage is subject to the small group market or the large group rules. In rare instances where the association of employers is sponsoring the group health plan and association itself is deemed the “employer,” the association coverage is considered a single group health plan. In that case, the number of employees employed by all of the employers participating in the association determines whether the coverage is subject to the small group market or large group market rules. In a mixed association (where different members have coverage that is subject to individual, small group, and/or large group market rules), it is not permissible under the PHS Act for mixed association coverage to comply only with the large group market rules. Each association member must receive coverage that complies with the requirements rising out of its status as an individual, small employer, or large employer.
- DMHC All Plan Letter (APL). On December 9, 2019, DMHC issued APL 19-024, reminding health plans, solicitors, brokers and others that in California, that group coverage may not be sold to individual subscribers directly or “indirectly through any arrangement.” Likewise, large group coverage may not be sold to small employers through MEWAs, Association Health Plans (AHPs), voluntary employees’ beneficiary associations (VEBAs) or any similar arrangements (collectively “associations”). California law significantly limits the extent to which employers and individuals may join together to purchase health care coverage as an association. The Knox-Keene Act provides for “guaranteed associations,” but prohibits the formation of new guaranteed associations.” And, even with respect to guaranteed associations, the Knox-Keene Act considers them to be “small employers;” they are not eligible to purchase large group coverage for their members. For all other associations (i.e., those that do not meet the definition of a guaranteed association), California law “looks through” the association to determine the appropriate market segment for the particular purchaser. SB 1375 codified this look-through by expressly stating: “The status of each distinct member of an association shall determine whether that member’s association coverage is individual, small group, or large group health coverage.” Due to the COVID-19 state of emergency, on May 5, 2020, the DMHC issued APL 20-019 to extend the end of the phase-out period through October 31, 2020. On August 21, 2020, DMHC extended the end of the phase-out period through February 28, 2021. On March 24, 2022, DMHC issued APL 22-012 describing the narrow exemption created to the law with the passage of SB 255 (Chapter 725, Statues of 2021 and SB 718 (Chapter 736, Statutes of 2021).. This APL required compliance filings to be submitted on or before April 15, 2022 and reminded plans that MEWA registration is required by June 1, 2022. Requirements for submission and filings were detailed in the APL. On April 20, 2023 DMHC issued APL 23-013 in which DMHC recognized that some health plans and MEWAs continue to renew large group coverage while DMHC was reviewing compliance submissions for SB 255 and SB 718. As such plans contracting with MEWAs were permitted to continue to renew for up to one year until December 31, 2023, if the health plan submitted specified information on or before May 19, 2023. The APL also exempted Taft-Hartley and Davis-Bacon Trusts from SB 1375.
- AHP/MEWAs in California. A March 2021 California Health Care Foundation report indicates regardless of recent federal and state legislation and litigation, reviews of DMHC filings and interviews suggest that AHPs remain an enduring and evolving component of California’s health insurance landscape. As of 2019, approximately 83 MEWAs, representing 151,000 enrollees, reported their enrollment data to state regulators. Commonly represented industries included agriculture, construction, education, food services, publishing and print organizations, real estate, and restaurant workers. A number of these organizations are represented by a single educational labor trust, professional employment organizations, industry-centric trusts, and brokerage firms. The vast majority of MEWAs are underwritten by Anthem Blue Cross, with a limited number spread across additional carriers such as Aetna Health of California, Blue Shield of California, Health Net of California, Kaiser Foundation Health Plan, Sistemas Medicos Nacionales, and Western Health Advantage. In 2023, those numbers have grown. DMHC filings show there were more than 190,000 enrollees covered in fully insured MEWAs and CDI filings show there were more than 20,500 insureds covered in fully insured MEWAs. Another 68,000 insureds are covered in self-insured MEWAs at CDI. During this four year period the small group market enrollment reported to DMHC dropped by over 200,000 lives.
- Why does it matter? MEWAs are based on a premise that larger groups can negotiate better rates through their purchasing power and economies of scale, and save on administrative costs. Around the passage of the federal ACA in 2010, which included major consumer protection reforms in the individual and small group health insurance markets, it was reported that some AHPs were sidestepping ACA requirements for the small group market by claiming single large-group health plan status under ERISA. According to the federal Department of Labor rules, where membership in a group or association is open to anyone engaged in a particular trade or profession regardless of their status as employers (i.e., the group or association members include persons who are not employers) or where control of the group or association is not vested solely in employer members, the group or association is not a bona fide group or association of employers for purposes of ERISA. An Urban Institute report indicates experts have raised concerns about AHPs claiming large group status because of the potential for adverse selection and increased premiums when different regulatory frameworks exist for the same type of health plan purchaser. Health insurers are generally allowed to adjust premiums based on health status and other permissible factors that apply to the large group market, small employers with younger, healthier employees may find more competitive premiums under plans regulated under large group rules. Small employer groups with higher risk profiles have less incentive to purchase through AHPs because they would be exposed to higher premiums and larger rate increases. Over time, if healthy groups gravitate to association coverage, this could subsequently lead to market segmentation and adverse selection in the plans sold through the small group market, including through market places such as Covered California, and the small group market outside of Covered California which is substantially larger than the Covered California small group market place.
- MEWA Expansion. Under the Trump Administration, regulatory efforts were attempted to broaden the criteria for determining when employers may join together in an employer group or association that is treated as the employer sponsor of single multiple-employer welfare benefit plans. The rules were challenged and not implemented and have been repealed under the Biden Administration, but actuary analysis at the time, indicated that the policy would cause premiums to rise in the individual and small group insurance markets over time. Additionally, California regulators raised concerns over the impacts to California’s insurance markets.
- Effects of higher premium rates. A Small Business Majority poll published earlier in 2024, indicates that small businesses that offer health coverage to their employees are seeing rising premium costs and higher deductibles and cost-sharing, which causes small employers to increase employee contributions, offer more limited coverage, cut other benefits, or drop coverage for their employee’s altogether. Segmenting some small groups out of the small group market may benefit some but will have implications for others who remain in the small group market. Much of this has to do with health insurance risk pools and how the products are rated. According to a Boston University module on paying for health care in the United States, community rating is where everyone within a defined geographic area pays the same premium, the consequence of which is that people who have less illness support people who have more illness in a given year. Experience rating is where everyone in an organizational group (employer group) pays the same premium, the consequence of which is that the group rate tends to be cheaper than the community rate. Total expected health care costs for one type of group may be lower or higher depending upon the experience rated group. For example, miners would likely have increased health risks compared to bankers so bankers might pay a lower premium. Small group market plans are community rated under the ACA. In California, almost all of the small group market is community rated and in the large group market experience rated groups account for roughly 71% of total covered enrollees. So this means that those whose experience rating is better (lower health care costs) will take advantage of opportunities to join AHP/MEWAs while those with higher health care costs will remain in the small group. If the risk in the small group becomes too high and premium rates rise too much, fewer and fewer small business will seek care in this market.
- Enforcement issues. At both the federal and state level monitoring and enforcement of AHP/MEWAs has been challenging. In comments responding to the Trump Administration rule, some raised concerns about minimal oversight by DOL. While there is a fine of $1,000 per day if AHPs do not file or file incomplete information, there is no evidence DOL has ever used this authority. According to a 2004 General Accounting Office (GAO) report, during scams in the 2000’s, DOL relied mostly on states to issue cease and desist orders on fraudulent MEWAs. A 2007 GAO report indicates DOL had a ratio of one employee conducting oversight or enforcement activities for over 8,000 plans. At the state level, four self-insured or partially self-insured MEWAs have been grandfathered in under rules from the 1990s: Group Insurance Trust of the California Society of Certified Public Accountants; Printing Industries Benefit Trust; United Agricultural Employee Welfare Benefit Plan and Trust; and, Western Growers Assurance Trust. However, data on the CDI website suggest there is an additional self-insured MEWA in operation today. With regard to fully insured MEWAs, three have registered at DMHC, including the sponsor of this bill, Biocom California, which established Beyond Benefits Life Science Association. However, many more have been reported on both CDI and DMHC websites. In addition, the approximately 150,000 individuals covered through these arrangements in 2019 has grown to over 200,000 in a four-year period.
- Related legislation. AB 2434 (Grayson) authorizes an association of employers to offer a large group health plan or health insurance policy to small group employer members of an association member in the engineering, surveying, or design industry, as specified. AB 2434 is set to be heard in this committee on July 3, 2024.
- Prior legislation. SB 718 (Chapter 736, Statutes of 2021) authorizes an association of employers to offer a large group health plan contract or health insurance policy to small group employer members in the biomedical industry if the association is headquartered in California, was established before March 23, 2010, and in continued existence as a bona fide association that may act as an employer, as specified.
SB 255 (Chapter 725, Statues of 2021) authorizes an association of employers to offer a large group health plan contract or health insurance policy if certain conditions are met, including the association was established prior to March 23, 2010, provides an equivalent to or greater level of coverage to the platinum level offered through Covered California and essential health benefits, and that it includes coverage for job categories on a project-by-project basis for one or more participating employers, for at least 101 employees.
SB 129 (Pan, Chapter 241, Statutes of 2019) requires annual health plan and insurer enrollment reporting to include enrollment data for products sold inside and outside of Covered California, any other business lines, and MEWAs; and requires CDI and DMHC to publicly report annual enrollment data no later than April 15th of each year.
SB 1375 (Hernandez, Chapter 700, Statutes of 2018) requires the status of each distinct member of an association to determine whether that member’s association coverage is individual, small group, or large group health coverage. Amends existing law that requires health coverage through an association that is not related to employment to be considered individual coverage, by deleting a reference to federal regulations.
- Support. Biocom California writes that in 2021, it sponsored SB 718 which statutorily authorized a successful “AHP” that had been in existence for more than a decade. Small life science companies must compete with the larger companies for talent at all levels. Because they operate in a highly competitive labor market, they must offer high quality, affordable health benefit plans to ensure they are able to attract and retain top-quality talent. To address this need, Biocom California established a health plan trust, specifically for its small and medium sized life science companies. The plan’s benefits are high quality and are available to not just the most experienced scientists but to all qualified employees of an enrolled company – including entry-level clerks and administrative assistants. SB 718 was introduced in 2021 because the biomedical industry’s high-quality health plan was swept into the DMHC’s regulatory action to reign in lower-quality health plans (known as MEWAs) pursuant to prior legislation. That same year, SB 255 was also introduced to provide the same statutory authority for the Producer’s Health Benefits Plan, a MEWA that provides health benefits to certain members of the entertainment industry. The safeguards included in the 2021 bill have proven effective – the health plan trust has remained stable, it has not resulted in significant flight from the small employer group market, while still providing cost-effective, high-quality health insurance to small life science companies and their employees. Given this, this bill updates the sunset date so that the members of the biomedical small employer health plan trust can continue to offer its health plan to its employees. Without the certainty of knowing that their health plan will continue to exist past 2025, due to the sunset included in SB 718, it is difficult for small and medium sized biomedical companies to properly plan. The California Small Manufacturers Trust, whose participants include biomedical manufacturing companies, support this bill because it will enable the California Small Manufacturers Trust to continue to offer its health plan to its over 2,500 employees, which it has been doing since 2011.
- More information is needed. Initially, a sunset date was placed on the authority for this AHP/MEWA to give policymakers time to assess potential negative impacts on California’s insurance market. At present, it appears the AHP/MEWA market is growing and requires more attention from regulators and now an additional AHP/MEWA is seeking authority pursuant to AB 2434. Policymakers need more information to determine if there are risks with continuing to authorize these arrangements.
- Amendments. This bill should be amended to require regulators to analyze AHP/MEWA activity and assess impact on California’s small group insurance market. The sunset dates in this bill and AB 2434 should be aligned and the mirror authority at CDI should be struck for multiple reasons. One reason is to limit regulator shopping.
SUPPORT AND OPPOSITION:
Support: Biocom California (sponsor)
California Small Manufacturers Trust
Oppose: None received
-- END --
Date of Hearing: May 1, 2024
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Buffy Wicks, Chair
ABPCA Bill Id:AB 2072
Author:(Weber) – As Amended Ver:April 18, 2024
Policy Committee: | Health | Vote: | 16 - 0 |
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Urgency: No State Mandated Local Program: Yes Reimbursable: No
SUMMARY:
This bill extends, from January 1, 2026, to January 1, 2033, the authorization for an association of employers that sponsors a multiple employer welfare arrangement (MEWA) to offer to individuals employed by a small group association member of the California biomedical industry a large group health plan or insurance policy. This bill also requires Department of Managed Health Care (DMHC) and the California Department of Insurance (CDI) to provide the Legislature the MEWAs’ most recent annual filings, and recommendations as to the whether any of those MEWAs should remain operative.
FISCAL EFFECT:
Minor and absorbable costs to DMHC and CDI.
COMMENTS:
- Purpose. This bill is sponsored by Biocom California. According to the author:
AB 2072 is critical for small biomedical companies to attract top talent in a very competitive labor market. It continues to allow small life science companies to join together in a fully insured multiple-employer agreement (as allowed by ERISA) under specified conditions, including that benefits offered must be actuarily equivalent to the platinum level of the California Health Benefit Exchange. The plan also must be offered through an insurance carrier licensed by the State. This allows small emerging companies to compete with global biopharmaceutical or medical device companies for talent by not asking an employee to sacrifice quality of health coverage for the opportunity to work at a small, innovative company, the very companies that are fueling California’s expanding economy.
- Background. Association Health Plans (AHPs) are insurance arrangements that allow small businesses, associations, and self-employed workers to organize together to purchase health care coverage, potentially obtaining lower-priced coverage by spreading risk and negotiating on behalf of a larger set of enrollees. AHPs have long been offered and regulated in California.
- Related Legislation. AB 2434 (Grayson) seeks a similar exemption to this bill for an association member in the engineering, surveying, or design industry. AB 2434 is pending in this committee.
- Prior Legislation.
- SB 718 (Bates), Chapter 736, Statutes of 2021, exempts from SB 1375 (Hernández), Chapter 700, Statutes of 2018 (below), a MEWA that provides health coverage for individuals in the biomedical industry. SB 718 requires the large group health plan to include coverage of employees of an association member in the biomedical industry and whose employer has operations in California. This bill deletes the sunset in SB 718.
- SB 255 (Portantino), Chapter 725, Statutes of 2021, exempts from SB 1375 (Hernández), Chapter 700, Statutes of 2018 (below), one MEWA that provides health coverage for freelance filming crews in the television commercial production industry.
- SB 1375 (Hernández), Chapter 700, Statutes of 2018, prohibits fully-insured MEWAs from selling large group coverage to small employers and specifies that the status of each distinct member of an association determines whether that member’s association coverage is individual, small group, or large group health coverage.
- SB 718 (Bates), Chapter 736, Statutes of 2021, exempts from SB 1375 (Hernández), Chapter 700, Statutes of 2018 (below), a MEWA that provides health coverage for individuals in the biomedical industry. SB 718 requires the large group health plan to include coverage of employees of an association member in the biomedical industry and whose employer has operations in California. This bill deletes the sunset in SB 718.
Analysis Prepared by: Allegra Kim / APPR. / (916) 319-2081
Date of Hearing: April 16, 2024
ASSEMBLY COMMITTEE ON HEALTH
Mia Bonta, Chair
ABPCA Bill Id:AB 2072
Author:((Weber) – As Introduced Ver:February 5, 2024
SUBJECT: Group health care coverage: biomedical industry.
SUMMARY: Repeals the sunset in existing law for the authorization of an association of employers to offer a large group health plan or insurance policy to small group employer members of the association consistent with the federal Employee Retirement Income Security Act of 1974 (ERISA), including that the association is a sponsor of a multiple employer welfare arrangements (MEWAs), and who are employed by an association member in the biomedical industry with operations in California.
EXISTING FEDERAL LAW:
- Establishes, pursuant to federal law, ERISA, which sets minimum standards for most voluntarily established pension and health plans in private industry, including Taft-Hartley Multi-Employer Health and Welfare Plans. Exempts these plans from state insurance regulation. [29 United States Code (U.S.C.) §1144]
- Defines, in federal law, the terms “employee welfare benefit plan” and “welfare plan” to mean any plan, fund, or program which established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, the following: a) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services; or, b) any benefit, as described (other than pensions on retirement or death, and insurance to provide such pensions). [29 U.S.C. §1002(1)]
- Defines in federal law, MEWA to mean an employee welfare benefit plan, or any other arrangement (other than an employee welfare benefit plan), which is established or maintained for the purpose of offering or providing any benefit in 2) above to the employees of two or more employers (including one or more self-employed individuals), or to their beneficiaries, as specified. [29 U.S.C. §1002(1)]
- Establishes the federal Patient Protection and Affordable Care Act (ACA), which enacts various health care coverage market reforms including the availability of health insurance exchanges, federal financial assistance in the form of premium assistance or cost sharing reductions to specified eligible individuals, and coverage of essential health benefits (mandated coverage of 10 benefit categories, including ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder, prescription drugs, rehabilitative and habilitative services and devices, lab services, preventive and wellness and chronic disease management, and pediatric services). [42 U.S.C. 300gg, et seq.]
EXISTING STATE LAW:
- Establishes, in state government, the California Health Benefit Exchange, referred to as Covered California, as an independent public entity not affiliated with an agency or department, and requires Covered California to compare and make available through selective contracting health insurance for individuals and small business purchasers as authorized under the ACA. [Government Code §100500-100522]
- Establishes the Department of Managed Health Care (DMHC) to regulate health plans under the Knox-Keene Health Care Service Plan Act of 1975 (KKA) and California Department of Insurance (CDI) to regulate health insurers. [Health and Safety Code (HSC) §1340, et seq., and Insurance Code (INS) §106, et seq.]
- Permits the DMHC Director to exempt from the KKA any class of persons or plan contracts if the DMHC Director finds the action to be in the public interest and not detrimental to the protection of subscribers, enrollees, or persons regulated under the KKA, and that the regulation of the persons or plan contracts is not essential to the purposes of the KKA. [HSC § 1343]
- Defines a health plan as:
- Any person who undertakes to arrange for the provision of health care services to subscribers or enrollees, or to pay for or to reimburse any part of the cost for those services, in return for a prepaid or periodic charge paid by or on behalf of the subscribers or enrollees; or,
- Any person, whether located within or outside of California, who solicits or contracts with a subscriber or enrollee in California to pay for or reimburse any part of the cost of, or who undertakes to arrange or arranges for, the provision of health care services that are to be provided wholly or in part in a foreign country in return for a prepaid or periodic charge paid by or on behalf of the subscriber or enrollee. [HSC § 1345]
- Requires health coverage through an association that is not related to employment to be considered individual coverage. Specifies that the status of each distinct member of an association determines whether that member’s association is individual, small group, or large group health insurance coverage. [HSC §1357.503 and INS §10753.05]
- Prohibits employer group health benefit plans from being issued, marketed, or sold, directly or indirectly through any arrangement, to a sole proprietorship or partnership without employees. Requires only individual health benefit plans to be sold to any entity without employees. Revises the definition of eligible employee for purposes of all small employer health plan contracts and health insurance policies to exclude sole proprietors or their spouses, and partners or their spouses. [HSC §1357 and INS §10755]
- Authorizes an association of employers to offer a large group health plan contract or health insurance policy to small group employer members of the association, consistent with the ERISA, if all of the following requirements are met:
- The association is headquartered in California, was established prior to March 23, 2010, has been in continued existence since, and is a bona fide association or group of employers that may act as an employer under ERISA. The association is the sponsor of a MEWA, and the MEWA is fully insured, headquartered in California, and is in full compliance with all applicable state and federal laws;
- The MEWA has offered a large group health plan contract or health insurance policy since January 1, 2012, in connection with an employee welfare benefit plan;
- The large group health plan contract or insurance policy offers to employees a level of coverage having an actuarial value greater than or equivalent to the platinum level of coverage available through Covered California and covers essential health benefits (EHBs), as specified;
- The large group health plan contract or insurance policy includes coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California;
- The large group health plan contract or insurance policy offers only fully insured benefits through an insurance contract with an insurance carrier licensed by CDI or with a health maintenance organization licensed by DMHC;
- Association members purchasing health coverage have a minimum of four full-time common law employees and are current employer members of the association sponsoring the plan. Employer members subsidize employee premiums by at least 51%;
- The association is an organization with business and organizational purposes unrelated to the provision of health care benefits and existed prior to the establishment of the MEWA offering the employee welfare benefit plan;
- The participating employers have a commonality of interests from being in the same industry, unrelated to the provision of health care benefits;
- Membership in the association is open solely to employers, and the participating employers, either directly or indirectly, exercise control over the employee welfare benefit plan, the large group health plan contract or insurance policy, both in form and substance;
- The large group health plan contract or insurance policy is treated as a single-risk-rated contract that is guaranteed issued and renewable for member employers, as well as their employees and dependents. An employee or dependent is not charged premium rates based on health status and is not excluded from coverage based upon any preexisting condition. Employee and dependent eligibility are not directly or indirectly based on health status or claims of any person;
- An employer otherwise eligible is not excluded from participating in a MEWA, or offering or renewing the large group health plan contract or insurance policy based on health status or claims of any employee or dependent;
- The MEWA at all times covers at least 101 employees; and,
- The association and MEWA files an application for registration with the DMHC or CDI on or before June 1, 2022.
- Prohibits, on or after January 1, 2022, a health plan or insurer from marketing, issuing, amending, renewing, or delivering large employer health care coverage to a MEWA that provides any benefit to a resident of California unless the MEWA is registered and complies with 10) above, or has an application pending. Requires DMHC or CDI to determine whether the MEWA is in compliance. Sunsets on January 1, 2026. [HSC §1357.503 and INS §10753.05]
FISCAL EFFECT: Unknown. This bill has not yet been analyzed by a fiscal committee.
COMMENTS:
- PURPOSE OF THIS BILL. According to the author, this bill is critical for small biomedical companies to attract top talent in a very competitive labor market. It continues to allow small life science companies to join together in a fully insured multiple-employer agreement (as allowed by ERISA) under specified conditions, including that benefits offered must be actuarially equivalent to the platinum level of the California Health Benefit Exchange. The plan also must be offered through an insurance carrier licensed by the State. The author concludes that this bill allows small emerging companies to compete with global biopharmaceutical or medical device companies for talent by not asking an employee to sacrifice quality of health coverage for the opportunity to work at a small, innovative company, the very companies that are fueling California’s expanding economy.
- BACKGROUND.
- Association Health Plans (AHPs). The California Health Care Foundation (CHCF) in a March 2021 Issue Brief writes that under federal law, AHPs are a type of MEWA established or maintained to provide insurance coverage for medical, surgical, hospital care, or other benefits in the event of sickness. AHPs are insurance arrangements that allow small businesses, associations, and self-employed workers to organize together to purchase health care coverage, potentially obtaining lower-priced coverage by spreading risk and negotiating on behalf of a larger set of enrollees. AHPs have long been offered and regulated in the state of California. California law established requirements for small group reform that applied to AHPs, including criteria for guaranteed issue, standard rating rules, defined risk corridors, specific age bands, and the number of geographic regions for the small group insurance market. In 2010, the ACA changed the rating rules and benefit coverage requirements in the individual and small group markets, and led to the establishment of Covered California. Through Covered California, individuals and employees of participating small businesses can enroll in subsidized and unsubsidized health coverage.
In 2018, according to CHCF, efforts to unwind key provisions of the ACA included the U.S. Department of Labor (DOL) new regulation for AHPs that made it easier for small employers to organize for the purpose of accessing health insurance typically available only to large groups. Proponents of the DOL rule argued that AHPs promote competition in increasingly consolidated insurance markets and provide more affordable options in the face of ever-escalating and unaffordable health insurance premiums. By allowing a more restrictive benefit design, such plans could also be attractive to small groups with a lower-risk profile. Such groups could design products that do not cover the EHBs as required for individual and small group plans under the ACA but instead comply with less stringent ERISA consumer protections. Opponents of the DOL rule argued that such plans would create adverse selection by driving higher-risk individuals into the state or federal health insurance marketplace options, increasing costs and ultimately undermining the stability of those risk pools. Premiums for the small group market are determined by a community rating methodology whereby the claims experience across the small group segment is pooled to determine health insurance premiums and annual rate increases.
According to a January 2018 paper authored by the Center on Health Insurance Reforms at Georgetown University, the primary purpose of the DOL rule is to allow more groups of small businesses and self-employed individuals to form AHPs so that they can offer coverage that is regulated under federal law as large-group coverage, and avoid ACA requirements such as EHBs, premium rating restrictions, the single risk pool requirement and risk adjustment. At that time, an analysis by Avalere Health indicated that individual and small group markets would see premiums rise, over a five-year period, 2.7% to 4% in the individual market and .1% to 1.9% in the small group market relative to current law because healthier enrollees would shift into AHPs. Avalere estimated 2.4 million to 4.3 million would switch to AHPs. In 2018, Covered California released a report indicating that this policy change along with another one related to short-term policies could cause an increase in premiums in 2019 of 0.3% to 1.3%. Together with the elimination of the individual mandate penalties (it should be noted that California subsequently enacted a state individual mandate), premium costs could go up by 12% to 32% in total in 2019.
- SB 1375. In response to the 2018 DOL rule, California enacted SB 1375, Chapter 700, Statutes of 2018, to prohibit fully-insured MEWA from selling large group coverage to small employers. SB 1375 protects the state’s individual and small group markets from potential adverse selection by specifying that the status of each distinct member of an association determines whether that member’s association coverage is individual, small group, or large group health coverage. In other words, if a member in the association is a small group, then the member would need to meet existing small group requirements in California law (i.e., small group premium rating restrictions).
The DMHC issued a 2019 All Plan Letter (APL) to remind health plans, solicitors, brokers and others that in California, group coverage may not be sold to individual subscribers directly or “indirectly through any arrangement.” California law significantly limits the extent to which employers and individuals may join together to purchase health care coverage as an association. As such, notwithstanding the DOL rule, individuals (including sole proprietors without employees) may purchase individual coverage only, regardless of whether they are in an association. Similarly, small employers may purchase small group coverage only, regardless of whether that coverage is sold through an association.
- SB 1375 Exemptions. In 2021, two bills were enacted to create two narrow exceptions to the general rule in SB 1375 that plans are barred from selling large group coverage to small employers and individuals through a MEWA. SB 255 (Portantino), Chapter 725, Statutes of 2021, exempts one MEWA that provides health coverage for freelance filming crews in the television commercial production industry. Eligibility requirements of the large group contract is required to provide coverage for employees and their dependents, who are employed in designated job categories on a project-by-project basis for one or more employers with no single project exceeding six months in duration. SB 718 (Bates), Chapter 736, Statutes of 2021, exempts a MEWA that provides health coverage for individuals in the biomedical industry. SB 718 requires the large group health plan to include coverage of common law employees, and their dependents, who are employed by an association member in the biomedical industry and whose employer has operations in California. The provisions related to SB 718 will sunset on January 1, 2026. This bill deletes the sunset in SB 718.
- Recent Proposed Federal Rule. Late last year, the DOL issued a proposed rule that would rescind the 2018 DOL rule designed to expand the formation and use of AHPs. According to a recent Health Affairs article, in the preamble to its proposed rule, DOL describes its “extensive experience” with unscrupulous promoters and operators of MEWAs. Compared to traditional health insurers, MEWAs have disproportionately suffered from financial mismanagement and abuse, leaving enrollees and providers with significant financial liabilities. Under ERISA, an association can only sponsor an employee health benefit plan when it is acting as an employer. Such plans can only be offered through genuine employment-based arrangements. In its proposed rule, DOL argues that the 2018 DOL rule loosening the business purpose, commonality of interest, and working owner standards do not align with the text and intent of ERISA. The agency also notes that the 2018 DOL rule would have increased adverse selection in the individual and small-group insurance markets. DOL further notes that the 2018 DOL rule would have enabled AHPs to offer coverage not subject to the ACA’s EHB standard, enabling them to offer only “skinny” plans that leave workers underinsured. These federal rules are pending.
- SUPPORT. Biocom California, sponsor of this bill, writes that Biocom California established a health plan trust, specifically for its small and medium sized life science companies. Biocom works on behalf of more than 1,7000 members. The plan’s benefits are high-quality and are available to not just the most experienced scientists but to all qualified employees of an enrolled company – including entry-level clerks and administrative assistants. SB 718 was introduced in 2021 because the biomedical industry’s high-quality health plan was swept into the DMHC’s regulatory action to reign in lower-quality health plans pursuant to prior legislation. The safeguards included in the 2021 bill have proven effective – the health plan trust has remained stable, it has not resulted in significant flight from the small employer group market, while still providing cost-effective, high-quality health insurance to small life science companies and their employees. Given this, this bill removes the January 1, 2026 sunset date so that the members of the biomedical small employer health plan trust can continue to offer its health plan to its employees. Without the certainty of knowing that their health plan will continue to exist past 2025, due to the sunset included in SB 718, it is difficult for small and medium sized biomedical companies to properly plan. Most small biomedical companies operate on extremely thin margins, making certainty of affordable, high-quality care in the long term critical to their success.
- RELATED LEGISLATION. AB 2434 (Grayson) seeks a similar exemption to this bill for an association member in the engineering, surveying, or design industry. AB 2434 is pending in Assembly Health Committee.
- PREVIOUS LEGISLATION.
- SB 718 until January 1, 2026, an association of employers to offer a large group health plan contract or insurance policy to small group employer members of the association consistent with ERISA if certain requirements are met, including that the association is the sponsor of a MEWA that has offered a large group health plan contract or insurance policy since January 1, 2012, in connection with an employee welfare benefit plan under ERISA, provides a specified level of coverage, and includes coverage for common law employees, and their dependents, who are employed by an association member in the biomedical industry with operations in California.
- SB 255 authorizes an association of employers to offer a large group health plan contract or insurance policy consistent with ERISA if certain requirements are met, including that the association is headquartered in this state, is a MEWA as defined under ERISA, and was established as a MEWA prior to March 23, 2010, and has been in continuous existence since that date. Includes coverage for employees, and their dependents, who are employed in designated job categories on a project-by-project basis for one or more participating employers, with no single project exceeding 6 months in duration, and who, in the course of that employment, are not covered by another group health care service plan contract or insurance policy in which the employer participates.
- SB 129 (Pan), Chapter 241, Statutes of 2019, requires annual health plan and insurer enrollment reporting to include enrollment data for products sold inside and outside of Covered California, any other business lines, and MEWAs; and requires DMHC and CDI to publicly report annual enrollment data no later than April 15th of each year.
- SB 1375 deletes sole proprietors, partners of a partnership, and the spouses of sole proprietors and partners from the definition of “eligible employee” and provides that, 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. Prohibits employer group health 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 requires that only individual health care service plans and individual health benefit plans be sold to any entity without employees. Revises the definition of a small employer to include any small employer, as defined, who purchases coverage through any arrangement, except as specified.
- SUGGESTED AMENDMENTS. As this bill seeks an exemption to existing law enacted in response to actions at the federal level to undermine the protections of the ACA, the committee may wish to consider including a sunset on this bill to allow regulators an opportunity to analyze and report to the Legislature on the impacts to the health care insurance market and compliance with existing law.
REGISTERED SUPPORT / OPPOSITION:
Support
Biocom California (sponsor)
California Small Manufacturers Trust
Opposition
None on file.
Analysis Prepared by: Kristene Mapile / HEALTH / (916) 319-2097
Discussed in Hearing
2MIN
Assembly Floor
1MIN
Senate Floor
57SEC
Senate Standing Committee on Appropriations
Bill Author
Bill Co-Author(s):
