10700. As used in this chapter:
(a) "Agent or broker" means a person or entity licensed under
Chapter 5 (commencing with Section 1621) of Part 2 of Division 1.
(b) "Benefit plan design" means a specific health coverage product
issued by a carrier to small employers, to trustees of associations
that include small employers, or to individuals if the coverage is
offered through employment or sponsored by an employer. It includes
services covered and the levels of copayment and deductibles, and it
may include the professional providers who are to provide those
services and the sites where those services are to be provided. A
benefit plan design may also be an integrated system for the
financing and delivery of quality health care services which has
significant incentives for the covered individuals to use the system.
(c) "Board" means the Major Risk Medical Insurance Board.
(d) "Carrier" means any disability insurance company or any other
entity that writes, issues, or administers health benefit plans that
cover the employees of small employers, regardless of the situs of
the contract or master policyholder. For the purposes of Articles 3
(commencing with Section 10719) and 4 (commencing with Section
10730), "carrier" also includes health care service plans.
(e) "Dependent" means the spouse or child of an eligible employee,
subject to applicable terms of the health benefit plan covering the
employee, and includes dependents of guaranteed association members
if the association elects to include dependents under its health
coverage at the same time it determines its membership composition
pursuant to subdivision (z).
(f) "Eligible employee" means either of the following:
(1) Any permanent employee who is actively engaged on a full-time
basis in the conduct of the business of the small employer with a
normal workweek of at least 30 hours, in the small employer's regular
place of business, who has met any statutorily authorized applicable
waiting period requirements. The term includes sole proprietors or
partners of a partnership, if they are actively engaged on a
full-time basis in the small employer's business, and they are
included as employees under a health benefit plan of a small
employer, but does not include employees who work on a part-time,
temporary, or substitute basis. It includes any eligible employee, as
defined in this paragraph, who obtains coverage through a guaranteed
association. Employees of employers purchasing through a guaranteed
association shall be deemed to be eligible employees if they would
otherwise meet the definition except for the number of persons
employed by the employer. A permanent employee who works at least 20
hours but not more than 29 hours is deemed to be an eligible employee
if all four of the following apply:
(A) The employee otherwise meets the definition of an eligible
employee except for the number of hours worked.
(B) The employer offers the employee health coverage under a
health benefit plan.
(C) All similarly situated individuals are offered coverage under
the health benefit plan.
(D) The employee must have worked at least 20 hours per normal
workweek for at least 50 percent of the weeks in the previous
calendar quarter. The insurer may request any necessary information
to document the hours and time period in question, including, but not
limited to, payroll records and employee wage and tax filings.
(2) Any member of a guaranteed association as defined in
subdivision (z).
(g) "Enrollee" means an eligible employee or dependent who
receives health coverage through the program from a participating
carrier.
(h) "Financially impaired" means, for the purposes of this
chapter, a carrier that, on or after the effective date of this
chapter, is not insolvent and is either:
(1) Deemed by the commissioner to be potentially unable to fulfill
its contractual obligations.
(2) Placed under an order of rehabilitation or conservation by a
court of competent jurisdiction.
(i) "Fund" means the California Small Group Reinsurance Fund.
(j) "Health benefit plan" means a policy or contract written or
administered by a carrier that arranges or provides health care
benefits for the covered eligible employees of a small employer and
their dependents. The term does not include accident only, credit,
disability income, coverage of Medicare services pursuant to
contracts with the United States government, Medicare supplement,
long-term care insurance, dental, vision, coverage issued as a
supplement to liability insurance, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
(k) "In force business" means an existing health benefit plan
issued by the carrier to a small employer.
(l) "Late enrollee" means an eligible employee or dependent who
has declined health coverage under a health benefit plan offered by a
small employer at the time of the initial enrollment period provided
under the terms of the health benefit plan and who subsequently
requests enrollment in a health benefit plan of that small employer,
provided that the initial enrollment period shall be a period of at
least 30 days. It also means any member of an association that is a
guaranteed association as well as any other person eligible to
purchase through the guaranteed association when that person has
failed to purchase coverage during the initial enrollment period
provided under the terms of the guaranteed association's health
benefit plan and who subsequently requests enrollment in the plan,
provided that the initial enrollment period shall be a period of at
least 30 days. However, an eligible employee, another person eligible
for coverage through a guaranteed association pursuant to
subdivision (z), or an eligible dependent shall not be considered a
late enrollee if any of the following is applicable:
(1) The individual meets all of the following requirements:
(A) He or she was covered under another employer health benefit
plan, the Healthy Families Program, the Access for Infants and
Mothers (AIM) Program, or the Medi-Cal program at the time the
individual was eligible to enroll.
(B) He or she certified at the time of the initial enrollment that
coverage under another employer health benefit plan, the Healthy
Families Program, the AIM Program, or the Medi-Cal program was the
reason for declining enrollment provided that, if the individual was
covered under another employer health plan, the individual was given
the opportunity to make the certification required by this
subdivision and was notified that failure to do so could result in
later treatment as a late enrollee.
(C) He or she has lost or will lose coverage under another
employer health benefit plan as a result of termination of employment
of the individual or of a person through whom the individual was
covered as a dependent, change in employment status of the
individual, or of a person through whom the individual was covered as
a dependent, the termination of the other plan's coverage, cessation
of an employer's contribution toward an employee or dependent's
coverage, death of the person through whom the individual was covered
as a dependent, legal separation, or divorce; or he or she has lost
or will lose coverage under the Healthy Families Program, the AIM
Program, or the Medi-Cal program.
(D) He or she requests enrollment within 30 days after termination
of coverage or employer contribution toward coverage provided under
another employer health benefit plan, or requests enrollment within
60 days after termination of Medi-Cal program coverage, AIM Program
coverage, or Healthy Families Program coverage.
(2) The individual is employed by an employer who offers multiple
health benefit plans and the individual elects a different plan
during an open enrollment period.
(3) A court has ordered that coverage be provided for a spouse or
minor child under a covered employee's health benefit plan.
(4) (A) In the case of an eligible employee as defined in
paragraph (1) of subdivision (f), the carrier cannot produce a
written statement from the employer stating that the individual or
the person through whom an individual was eligible to be covered as a
dependent, prior to declining coverage, was provided with, and
signed acknowledgment of, an explicit written notice in boldface type
specifying that failure to elect coverage during the initial
enrollment period permits the carrier to impose, at the time of the
individual's later decision to elect coverage, an exclusion from
coverage for a period of 12 months as well as a six-month preexisting
condition exclusion unless the individual meets the criteria
specified in paragraph (1), (2), or (3).
(B) In the case of an eligible employee who is a guaranteed
association member, the plan cannot produce a written statement from
the guaranteed association stating that the association sent a
written notice in boldface type to all potentially eligible
association members at their last known address prior to the initial
enrollment period informing members that failure to elect coverage
during the initial enrollment period permits the plan to impose, at
the time of the member's later decision to elect coverage, an
exclusion from coverage for a period of 12 months as well as a
six-month preexisting condition exclusion unless the member can
demonstrate that he or she meets the requirements of subparagraphs
(A), (C), and (D) of paragraph (1) or meets the requirements of
paragraph (2) or (3).
(C) In the case of an employer or person who is not a member of an
association, was eligible to purchase coverage through a guaranteed
association, and did not do so, and would not be eligible to purchase
guaranteed coverage unless purchased through a guaranteed
association, the employer or person can demonstrate that he or she
meets the requirements of subparagraphs (A), (C), and (D) of
paragraph (1), or meets the requirements of paragraph (2) or (3), or
that he or she recently had a change in status that would make him or
her eligible and that application for coverage was made within 30
days of the change.
(5) The individual is an employee or dependent who meets the
criteria described in paragraph (1) and was under a COBRA
continuation provision and the coverage under that provision has been
exhausted. For purposes of this section, the definition of "COBRA"
set forth in subdivision (e) of Section 10116.5 shall apply.
(6) The individual is a dependent of an enrolled eligible employee
who has lost or will lose his or her coverage under the Healthy
Families Program, the AIM Program, or the Medi-Cal program and
requests enrollment within 60 days after termination of that
coverage.
(7) The individual is an eligible employee who previously declined
coverage under an employer health benefit plan and who has
subsequently acquired a dependent who would be eligible for coverage
as a dependent of the employee through marriage, birth, adoption, or
placement for adoption, and who enrolls for coverage under that
employer health benefit plan on his or her behalf and on behalf of
his or her dependent within 30 days following the date of marriage,
birth, adoption, or placement for adoption, in which case the
effective date of coverage shall be the first day of the month
following the date the completed request for enrollment is received
in the case of marriage, or the date of birth, or the date of
adoption or placement for adoption, whichever applies. Notice of the
special enrollment rights contained in this paragraph shall be
provided by the employer to an employee at or before the time the
employee is offered an opportunity to enroll in plan coverage.
(8) The individual is an eligible employee who has declined
coverage for himself or herself or his or her dependents during a
previous enrollment period because his or her dependents were covered
by another employer health benefit plan at the time of the previous
enrollment period. That individual may enroll himself or herself or
his or her dependents for plan coverage during a special open
enrollment opportunity if his or her dependents have lost or will
lose coverage under that other employer health benefit plan. The
special open enrollment opportunity shall be requested by the
employee not more than 30 days after the date that the other health
coverage is exhausted or terminated. Upon enrollment, coverage shall
be effective not later than the first day of the first calendar month
beginning after the date the request for enrollment is received.
Notice of the special enrollment rights contained in this paragraph
shall be provided by the employer to an employee at or before the
time the employee is offered an opportunity to enroll in plan
coverage.
(m) "New business" means a health benefit plan issued to a small
employer that is not the carrier's in force business.
(n) "Participating carrier" means a carrier that has entered into
a contract with the program to provide health benefits coverage under
this part.
(o) "Plan of operation" means the plan of operation of the fund,
including articles, bylaws, and operating rules adopted by the fund
pursuant to Article 3 (commencing with Section 10719).
(p) "Program" means the Health Insurance Plan of California.
(q) "Preexisting condition provision" means a policy provision
that excludes coverage for charges or expenses incurred during a
specified period following the insured's effective date of coverage,
as to a condition for which medical advice, diagnosis, care, or
treatment was recommended or received during a specified period
immediately preceding the effective date of coverage.
(r) "Creditable coverage" means:
(1) Any individual or group policy, contract, or program, that is
written or administered by a disability insurer, health care service
plan, fraternal benefits society, self-insured employer plan, or any
other entity, in this state or elsewhere, and that arranges or
provides medical, hospital, and surgical coverage not designed to
supplement other private or governmental plans. The term includes
continuation or conversion coverage but does not include accident
only, credit, coverage for onsite medical clinics, disability income,
Medicare supplement, long-term care, dental, vision, coverage issued
as a supplement to liability insurance, insurance arising out of a
workers' compensation or similar law, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
(2) The federal Medicare Program pursuant to Title XVIII of the
federal Social Security Act (42 U.S.C. Sec. 1395 et seq.).
(3) The Medicaid Program pursuant to Title XIX of the federal
Social Security Act (42 U.S.C. Sec. 1396 et seq.).
(4) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
(5) 10 U.S.C. Chapter 55 (commencing with Section 1071) (Civilian
Health and Medical Program of the Uniformed Services (CHAMPUS)).
(6) A medical care program of the Indian Health Service or of a
tribal organization.
(7) A state health benefits risk pool.
(8) A health plan offered under 5 U.S.C. Chapter 89 (commencing
with Section 8901) (Federal Employees Health Benefits Program
(FEHBP)).
(9) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)(I) of the federal Public Health
Service Act, as amended by Public Law 104-191, the federal Health
Insurance Portability and Accountability Act of 1996.
(10) A health benefit plan under Section 5(e) of the federal Peace
Corps Act (22 U.S.C. Sec. 2504(e)).
(11) Any other creditable coverage as defined by subdivision (c)
of Section 2701 of Title XXVII of the federal Public Health Service
Act (42 U.S.C. Sec. 300gg(c)).
(s) "Rating period" means the period for which premium rates
established by a carrier are in effect and shall be no less than six
months.
(t) "Risk adjusted employee risk rate" means the rate determined
for an eligible employee of a small employer in a particular risk
category after applying the risk adjustment factor.
(u) "Risk adjustment factor" means the percent adjustment to be
applied equally to each standard employee risk rate for a particular
small employer, based upon any expected deviations from standard
claims. This factor may not be more than 120 percent or less than 80
percent until July 1, 1996. Effective July 1, 1996, this factor may
not be more than 110 percent or less than 90 percent.
(v) "Risk category" means the following characteristics of an
eligible employee: age, geographic region, and family size of the
employee, plus the benefit plan design selected by the small
employer.
(1) No more than the following age categories may be used in
determining premium rates:
Under 30
30-39
40-49
50-54
55-59
60-64
65 and over
However, for the 65 and over age category, separate premium rates
may be specified depending upon whether coverage under the health
benefit plan will be primary or secondary to benefits provided by the
federal Medicare Program pursuant to Title XVIII of the federal
Social Security Act.
(2) Small employer carriers shall base rates to small employers
using no more than the following family size categories:
(A) Single.
(B) Married couple.
(C) One adult and child or children.
(D) Married couple and child or children.
(3) (A) In determining rates for small employers, a carrier that
operates statewide shall use no more than nine geographic regions in
the state, have no region smaller than an area in which the first
three digits of all its ZIP Codes are in common within a county, and
shall divide no county into more than two regions. Carriers shall be
deemed to be operating statewide if their coverage area includes 90
percent or more of the state's population. Geographic regions
established pursuant to this section shall, as a group, cover the
entire state, and the area encompassed in a geographic region shall
be separate and distinct from areas encompassed in other geographic
regions. Geographic regions may be noncontiguous.
(B) In determining rates for small employers, a carrier that does
not operate statewide shall use no more than the number of geographic
regions in the state than is determined by the following formula:
the population, as determined in the last federal census, of all
counties which are included in their entirety in a carrier's service
area divided by the total population of the state, as determined in
the last federal census, multiplied by nine. The resulting number
shall be rounded to the nearest whole integer. No region may be
smaller than an area in which the first three digits of all its ZIP
Codes are in common within a county and no county may be divided into
more than two regions. The area encompassed in a geographic region
shall be separate and distinct from areas encompassed in other
geographic regions. Geographic regions may be noncontiguous. No
carrier shall have less than one geographic area.
(w) "Small employer" means either of the following:
(1) Any person, proprietary or nonprofit firm, corporation,
partnership, public agency, or association that is actively engaged
in business or service that, on at least 50 percent of its working
days during the preceding calendar quarter, or preceding calendar
year, employed at least 2, but not more than 50, eligible employees,
the majority of whom were employed within this state, that was not
formed primarily for purposes of buying health insurance and in which
a bona fide employer-employee relationship exists. In determining
whether to apply the calendar quarter or calendar year test, the
insurer shall use the test that ensures eligibility if only one test
would establish eligibility. However, for purposes of subdivisions
(b) and (h) of Section 10705, the definition shall include employers
with at least three eligible employees until July 1, 1997, and two
eligible employees thereafter. In determining the number of eligible
employees, companies that are affiliated companies and that are
eligible to file a combined income tax return for purposes of state
taxation shall be considered one employer. Subsequent to the issuance
of a health benefit plan to a small employer pursuant to this
chapter, and for the purpose of determining eligibility, the size of
a small employer shall be determined annually. Except as otherwise
specifically provided, provisions of this chapter that apply to a
small employer shall continue to apply until the health benefit plan
anniversary following the date the employer no longer meets the
requirements of this definition. It includes any small employer as
defined in this paragraph who purchases coverage through a guaranteed
association, and any employer purchasing coverage for employees
through a guaranteed association.
(2) Any guaranteed association, as defined in subdivision (y),
that purchases health coverage for members of the association.
(x) "Standard employee risk rate" means the rate applicable to an
eligible employee in a particular risk category in a small employer
group.
(y) "Guaranteed association" means a nonprofit organization
comprised of a group of individuals or employers who associate based
solely on participation in a specified profession or industry,
accepting for membership any individual or employer meeting its
membership criteria which (1) includes one or more small employers as
defined in paragraph (1) of subdivision (w), (2) does not condition
membership directly or indirectly on the health or claims history of
any person, (3) uses membership dues solely for and in consideration
of the membership and membership benefits, except that the amount of
the dues shall not depend on whether the member applies for or
purchases insurance offered by the association, (4) is organized and
maintained in good faith for purposes unrelated to insurance, (5) has
been in active existence on January 1, 1992, and for at least five
years prior to that date, (6) has been offering health insurance to
its members for at least five years prior to January 1, 1992, (7) has
a constitution and bylaws, or other analogous governing documents
that provide for election of the governing board of the association
by its members, (8) offers any benefit plan design that is purchased
to all individual members and employer members in this state, (9)
includes any member choosing to enroll in the benefit plan design
offered to the association provided that the member has agreed to
make the required premium payments, and (10) covers at least 1,000
persons with the carrier with which it contracts. The requirement of
1,000 persons may be met if component chapters of a statewide
association contracting separately with the same carrier cover at
least 1,000 persons in the aggregate.
This subdivision applies regardless of whether a master policy by
an admitted insurer is delivered directly to the association or a
trust formed for or sponsored by an association to administer
benefits for association members.
For purposes of this subdivision, an association formed by a
merger of two or more associations after January 1, 1992, and
otherwise meeting the criteria of this subdivision shall be deemed to
have been in active existence on January 1, 1992, if its predecessor
organizations had been in active existence on January 1, 1992, and
for at least five years prior to that date and otherwise met the
criteria of this subdivision.
(z) "Members of a guaranteed association" means any individual or
employer meeting the association's membership criteria if that person
is a member of the association and chooses to purchase health
coverage through the association. At the association's discretion, it
may also include employees of association members, association
staff, retired members, retired employees of members, and surviving
spouses and dependents of deceased members. However, if an
association chooses to include those persons as members of the
guaranteed association, the association must so elect in advance of
purchasing coverage from a plan. Health plans may require an
association to adhere to the membership composition it selects for up
to 12 months.
(aa) "Affiliation period" means a period that, under the terms of
the health benefit plan, must expire before health care services
under the plan become effective.
10701. (a) For purposes of this chapter, "health benefit plan" does
not include policies or certificates of specified disease or
hospital confinement indemnity provided that the carrier offering
those policies or certificates complies with the following:
(1) The carrier files, on or before March 1 of each year, a
certification with the commissioner that contains the statement and
information described in paragraph (2).
(2) The certification required in paragraph (1) shall contain the
following:
(A) A statement from the carrier certifying that policies or
certificates described in this section (i) are being offered and
marketed as supplemental health insurance and not as a substitute for
hospital or medical expense insurance, health care service plans, or
major medical expense insurance, (ii) the disclosure forms as
described in Section 10603 contains the following statement
prominently on the first page: "This is a supplement to health
insurance. It is not a substitute for hospital or medical expense
insurance, a health maintenance organization (HMO) contract, or major
medical expense insurance," and (iii) are not being offered,
marketed, or sold in a manner that would make the purchase of the
policies contingent upon the sale of any product sold under Sections
10700 and 10718, or under Section 1357 of the Health and Safety Code.
(B) A summary description of each policy or certificate described
in this section, including the average annual premium rates, or range
of premium rates in cases where premiums vary by age, gender, or
other factors, charged for the policies and certificates in this
state.
(3) In the case of a policy or certificate that is described in
this section and that is offered for the first time in this state on
or after January 1, 1997, the carrier files with the commissioner the
information and statement required in paragraph (2) at least 30 days
prior to the date such a policy or certificate is issued or
delivered in this state.
(b) As used in this section, "policies or certificates of
specified disease" and "policies or certificates of hospital
confinement indemnity" mean policies or certificates of insurance
sold to an insured to supplement other health insurance coverage as
specified in this section. An insurer issuing a "policy or
certificate of specified disease" or a "policy or certificate of
hospital confinement indemnity" shall require that the person to be
insured is covered by an individual or group policy or contract that
arranges or provides medical, hospital, and surgical coverage not
designed to supplement other private or governmental plans.
10700. As used in this chapter:
(a) "Agent or broker" means a person or entity licensed under
Chapter 5 (commencing with Section 1621) of Part 2 of Division 1.
(b) "Benefit plan design" means a specific health coverage product
issued by a carrier to small employers, to trustees of associations
that include small employers, or to individuals if the coverage is
offered through employment or sponsored by an employer. It includes
services covered and the levels of copayment and deductibles, and it
may include the professional providers who are to provide those
services and the sites where those services are to be provided. A
benefit plan design may also be an integrated system for the
financing and delivery of quality health care services which has
significant incentives for the covered individuals to use the system.
(c) "Board" means the Major Risk Medical Insurance Board.
(d) "Carrier" means any disability insurance company or any other
entity that writes, issues, or administers health benefit plans that
cover the employees of small employers, regardless of the situs of
the contract or master policyholder. For the purposes of Articles 3
(commencing with Section 10719) and 4 (commencing with Section
10730), "carrier" also includes health care service plans.
(e) "Dependent" means the spouse or child of an eligible employee,
subject to applicable terms of the health benefit plan covering the
employee, and includes dependents of guaranteed association members
if the association elects to include dependents under its health
coverage at the same time it determines its membership composition
pursuant to subdivision (z).
(f) "Eligible employee" means either of the following:
(1) Any permanent employee who is actively engaged on a full-time
basis in the conduct of the business of the small employer with a
normal workweek of at least 30 hours, in the small employer's regular
place of business, who has met any statutorily authorized applicable
waiting period requirements. The term includes sole proprietors or
partners of a partnership, if they are actively engaged on a
full-time basis in the small employer's business, and they are
included as employees under a health benefit plan of a small
employer, but does not include employees who work on a part-time,
temporary, or substitute basis. It includes any eligible employee, as
defined in this paragraph, who obtains coverage through a guaranteed
association. Employees of employers purchasing through a guaranteed
association shall be deemed to be eligible employees if they would
otherwise meet the definition except for the number of persons
employed by the employer. A permanent employee who works at least 20
hours but not more than 29 hours is deemed to be an eligible employee
if all four of the following apply:
(A) The employee otherwise meets the definition of an eligible
employee except for the number of hours worked.
(B) The employer offers the employee health coverage under a
health benefit plan.
(C) All similarly situated individuals are offered coverage under
the health benefit plan.
(D) The employee must have worked at least 20 hours per normal
workweek for at least 50 percent of the weeks in the previous
calendar quarter. The insurer may request any necessary information
to document the hours and time period in question, including, but not
limited to, payroll records and employee wage and tax filings.
(2) Any member of a guaranteed association as defined in
subdivision (z).
(g) "Enrollee" means an eligible employee or dependent who
receives health coverage through the program from a participating
carrier.
(h) "Financially impaired" means, for the purposes of this
chapter, a carrier that, on or after the effective date of this
chapter, is not insolvent and is either:
(1) Deemed by the commissioner to be potentially unable to fulfill
its contractual obligations.
(2) Placed under an order of rehabilitation or conservation by a
court of competent jurisdiction.
(i) "Fund" means the California Small Group Reinsurance Fund.
(j) "Health benefit plan" means a policy or contract written or
administered by a carrier that arranges or provides health care
benefits for the covered eligible employees of a small employer and
their dependents. The term does not include accident only, credit,
disability income, coverage of Medicare services pursuant to
contracts with the United States government, Medicare supplement,
long-term care insurance, dental, vision, coverage issued as a
supplement to liability insurance, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
(k) "In force business" means an existing health benefit plan
issued by the carrier to a small employer.
(l) "Late enrollee" means an eligible employee or dependent who
has declined health coverage under a health benefit plan offered by a
small employer at the time of the initial enrollment period provided
under the terms of the health benefit plan and who subsequently
requests enrollment in a health benefit plan of that small employer,
provided that the initial enrollment period shall be a period of at
least 30 days. It also means any member of an association that is a
guaranteed association as well as any other person eligible to
purchase through the guaranteed association when that person has
failed to purchase coverage during the initial enrollment period
provided under the terms of the guaranteed association's health
benefit plan and who subsequently requests enrollment in the plan,
provided that the initial enrollment period shall be a period of at
least 30 days. However, an eligible employee, another person eligible
for coverage through a guaranteed association pursuant to
subdivision (z), or an eligible dependent shall not be considered a
late enrollee if any of the following is applicable:
(1) The individual meets all of the following requirements:
(A) He or she was covered under another employer health benefit
plan, the Healthy Families Program, the Access for Infants and
Mothers (AIM) Program, or the Medi-Cal program at the time the
individual was eligible to enroll.
(B) He or she certified at the time of the initial enrollment that
coverage under another employer health benefit plan, the Healthy
Families Program, the AIM Program, or the Medi-Cal program was the
reason for declining enrollment provided that, if the individual was
covered under another employer health plan, the individual was given
the opportunity to make the certification required by this
subdivision and was notified that failure to do so could result in
later treatment as a late enrollee.
(C) He or she has lost or will lose coverage under another
employer health benefit plan as a result of termination of employment
of the individual or of a person through whom the individual was
covered as a dependent, change in employment status of the
individual, or of a person through whom the individual was covered as
a dependent, the termination of the other plan's coverage, cessation
of an employer's contribution toward an employee or dependent's
coverage, death of the person through whom the individual was covered
as a dependent, legal separation, or divorce; or he or she has lost
or will lose coverage under the Healthy Families Program, the AIM
Program, or the Medi-Cal program.
(D) He or she requests enrollment within 30 days after termination
of coverage or employer contribution toward coverage provided under
another employer health benefit plan, or requests enrollment within
60 days after termination of Medi-Cal program coverage, AIM Program
coverage, or Healthy Families Program coverage.
(2) The individual is employed by an employer who offers multiple
health benefit plans and the individual elects a different plan
during an open enrollment period.
(3) A court has ordered that coverage be provided for a spouse or
minor child under a covered employee's health benefit plan.
(4) (A) In the case of an eligible employee as defined in
paragraph (1) of subdivision (f), the carrier cannot produce a
written statement from the employer stating that the individual or
the person through whom an individual was eligible to be covered as a
dependent, prior to declining coverage, was provided with, and
signed acknowledgment of, an explicit written notice in boldface type
specifying that failure to elect coverage during the initial
enrollment period permits the carrier to impose, at the time of the
individual's later decision to elect coverage, an exclusion from
coverage for a period of 12 months as well as a six-month preexisting
condition exclusion unless the individual meets the criteria
specified in paragraph (1), (2), or (3).
(B) In the case of an eligible employee who is a guaranteed
association member, the plan cannot produce a written statement from
the guaranteed association stating that the association sent a
written notice in boldface type to all potentially eligible
association members at their last known address prior to the initial
enrollment period informing members that failure to elect coverage
during the initial enrollment period permits the plan to impose, at
the time of the member's later decision to elect coverage, an
exclusion from coverage for a period of 12 months as well as a
six-month preexisting condition exclusion unless the member can
demonstrate that he or she meets the requirements of subparagraphs
(A), (C), and (D) of paragraph (1) or meets the requirements of
paragraph (2) or (3).
(C) In the case of an employer or person who is not a member of an
association, was eligible to purchase coverage through a guaranteed
association, and did not do so, and would not be eligible to purchase
guaranteed coverage unless purchased through a guaranteed
association, the employer or person can demonstrate that he or she
meets the requirements of subparagraphs (A), (C), and (D) of
paragraph (1), or meets the requirements of paragraph (2) or (3), or
that he or she recently had a change in status that would make him or
her eligible and that application for coverage was made within 30
days of the change.
(5) The individual is an employee or dependent who meets the
criteria described in paragraph (1) and was under a COBRA
continuation provision and the coverage under that provision has been
exhausted. For purposes of this section, the definition of "COBRA"
set forth in subdivision (e) of Section 10116.5 shall apply.
(6) The individual is a dependent of an enrolled eligible employee
who has lost or will lose his or her coverage under the Healthy
Families Program, the AIM Program, or the Medi-Cal program and
requests enrollment within 60 days after termination of that
coverage.
(7) The individual is an eligible employee who previously declined
coverage under an employer health benefit plan and who has
subsequently acquired a dependent who would be eligible for coverage
as a dependent of the employee through marriage, birth, adoption, or
placement for adoption, and who enrolls for coverage under that
employer health benefit plan on his or her behalf and on behalf of
his or her dependent within 30 days following the date of marriage,
birth, adoption, or placement for adoption, in which case the
effective date of coverage shall be the first day of the month
following the date the completed request for enrollment is received
in the case of marriage, or the date of birth, or the date of
adoption or placement for adoption, whichever applies. Notice of the
special enrollment rights contained in this paragraph shall be
provided by the employer to an employee at or before the time the
employee is offered an opportunity to enroll in plan coverage.
(8) The individual is an eligible employee who has declined
coverage for himself or herself or his or her dependents during a
previous enrollment period because his or her dependents were covered
by another employer health benefit plan at the time of the previous
enrollment period. That individual may enroll himself or herself or
his or her dependents for plan coverage during a special open
enrollment opportunity if his or her dependents have lost or will
lose coverage under that other employer health benefit plan. The
special open enrollment opportunity shall be requested by the
employee not more than 30 days after the date that the other health
coverage is exhausted or terminated. Upon enrollment, coverage shall
be effective not later than the first day of the first calendar month
beginning after the date the request for enrollment is received.
Notice of the special enrollment rights contained in this paragraph
shall be provided by the employer to an employee at or before the
time the employee is offered an opportunity to enroll in plan
coverage.
(m) "New business" means a health benefit plan issued to a small
employer that is not the carrier's in force business.
(n) "Participating carrier" means a carrier that has entered into
a contract with the program to provide health benefits coverage under
this part.
(o) "Plan of operation" means the plan of operation of the fund,
including articles, bylaws, and operating rules adopted by the fund
pursuant to Article 3 (commencing with Section 10719).
(p) "Program" means the Health Insurance Plan of California.
(q) "Preexisting condition provision" means a policy provision
that excludes coverage for charges or expenses incurred during a
specified period following the insured's effective date of coverage,
as to a condition for which medical advice, diagnosis, care, or
treatment was recommended or received during a specified period
immediately preceding the effective date of coverage.
(r) "Creditable coverage" means:
(1) Any individual or group policy, contract, or program, that is
written or administered by a disability insurer, health care service
plan, fraternal benefits society, self-insured employer plan, or any
other entity, in this state or elsewhere, and that arranges or
provides medical, hospital, and surgical coverage not designed to
supplement other private or governmental plans. The term includes
continuation or conversion coverage but does not include accident
only, credit, coverage for onsite medical clinics, disability income,
Medicare supplement, long-term care, dental, vision, coverage issued
as a supplement to liability insurance, insurance arising out of a
workers' compensation or similar law, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
(2) The federal Medicare Program pursuant to Title XVIII of the
federal Social Security Act (42 U.S.C. Sec. 1395 et seq.).
(3) The Medicaid Program pursuant to Title XIX of the federal
Social Security Act (42 U.S.C. Sec. 1396 et seq.).
(4) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
(5) 10 U.S.C. Chapter 55 (commencing with Section 1071) (Civilian
Health and Medical Program of the Uniformed Services (CHAMPUS)).
(6) A medical care program of the Indian Health Service or of a
tribal organization.
(7) A state health benefits risk pool.
(8) A health plan offered under 5 U.S.C. Chapter 89 (commencing
with Section 8901) (Federal Employees Health Benefits Program
(FEHBP)).
(9) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)(I) of the federal Public Health
Service Act, as amended by Public Law 104-191, the federal Health
Insurance Portability and Accountability Act of 1996.
(10) A health benefit plan under Section 5(e) of the federal Peace
Corps Act (22 U.S.C. Sec. 2504(e)).
(11) Any other creditable coverage as defined by subdivision (c)
of Section 2701 of Title XXVII of the federal Public Health Service
Act (42 U.S.C. Sec. 300gg(c)).
(s) "Rating period" means the period for which premium rates
established by a carrier are in effect and shall be no less than six
months.
(t) "Risk adjusted employee risk rate" means the rate determined
for an eligible employee of a small employer in a particular risk
category after applying the risk adjustment factor.
(u) "Risk adjustment factor" means the percent adjustment to be
applied equally to each standard employee risk rate for a particular
small employer, based upon any expected deviations from standard
claims. This factor may not be more than 120 percent or less than 80
percent until July 1, 1996. Effective July 1, 1996, this factor may
not be more than 110 percent or less than 90 percent.
(v) "Risk category" means the following characteristics of an
eligible employee: age, geographic region, and family size of the
employee, plus the benefit plan design selected by the small
employer.
(1) No more than the following age categories may be used in
determining premium rates:
Under 30
30-39
40-49
50-54
55-59
60-64
65 and over
However, for the 65 and over age category, separate premium rates
may be specified depending upon whether coverage under the health
benefit plan will be primary or secondary to benefits provided by the
federal Medicare Program pursuant to Title XVIII of the federal
Social Security Act.
(2) Small employer carriers shall base rates to small employers
using no more than the following family size categories:
(A) Single.
(B) Married couple.
(C) One adult and child or children.
(D) Married couple and child or children.
(3) (A) In determining rates for small employers, a carrier that
operates statewide shall use no more than nine geographic regions in
the state, have no region smaller than an area in which the first
three digits of all its ZIP Codes are in common within a county, and
shall divide no county into more than two regions. Carriers shall be
deemed to be operating statewide if their coverage area includes 90
percent or more of the state's population. Geographic regions
established pursuant to this section shall, as a group, cover the
entire state, and the area encompassed in a geographic region shall
be separate and distinct from areas encompassed in other geographic
regions. Geographic regions may be noncontiguous.
(B) In determining rates for small employers, a carrier that does
not operate statewide shall use no more than the number of geographic
regions in the state than is determined by the following formula:
the population, as determined in the last federal census, of all
counties which are included in their entirety in a carrier's service
area divided by the total population of the state, as determined in
the last federal census, multiplied by nine. The resulting number
shall be rounded to the nearest whole integer. No region may be
smaller than an area in which the first three digits of all its ZIP
Codes are in common within a county and no county may be divided into
more than two regions. The area encompassed in a geographic region
shall be separate and distinct from areas encompassed in other
geographic regions. Geographic regions may be noncontiguous. No
carrier shall have less than one geographic area.
(w) "Small employer" means either of the following:
(1) Any person, proprietary or nonprofit firm, corporation,
partnership, public agency, or association that is actively engaged
in business or service that, on at least 50 percent of its working
days during the preceding calendar quarter, or preceding calendar
year, employed at least 2, but not more than 50, eligible employees,
the majority of whom were employed within this state, that was not
formed primarily for purposes of buying health insurance and in which
a bona fide employer-employee relationship exists. In determining
whether to apply the calendar quarter or calendar year test, the
insurer shall use the test that ensures eligibility if only one test
would establish eligibility. However, for purposes of subdivisions
(b) and (h) of Section 10705, the definition shall include employers
with at least three eligible employees until July 1, 1997, and two
eligible employees thereafter. In determining the number of eligible
employees, companies that are affiliated companies and that are
eligible to file a combined income tax return for purposes of state
taxation shall be considered one employer. Subsequent to the issuance
of a health benefit plan to a small employer pursuant to this
chapter, and for the purpose of determining eligibility, the size of
a small employer shall be determined annually. Except as otherwise
specifically provided, provisions of this chapter that apply to a
small employer shall continue to apply until the health benefit plan
anniversary following the date the employer no longer meets the
requirements of this definition. It includes any small employer as
defined in this paragraph who purchases coverage through a guaranteed
association, and any employer purchasing coverage for employees
through a guaranteed association.
(2) Any guaranteed association, as defined in subdivision (y),
that purchases health coverage for members of the association.
(x) "Standard employee risk rate" means the rate applicable to an
eligible employee in a particular risk category in a small employer
group.
(y) "Guaranteed association" means a nonprofit organization
comprised of a group of individuals or employers who associate based
solely on participation in a specified profession or industry,
accepting for membership any individual or employer meeting its
membership criteria which (1) includes one or more small employers as
defined in paragraph (1) of subdivision (w), (2) does not condition
membership directly or indirectly on the health or claims history of
any person, (3) uses membership dues solely for and in consideration
of the membership and membership benefits, except that the amount of
the dues shall not depend on whether the member applies for or
purchases insurance offered by the association, (4) is organized and
maintained in good faith for purposes unrelated to insurance, (5) has
been in active existence on January 1, 1992, and for at least five
years prior to that date, (6) has been offering health insurance to
its members for at least five years prior to January 1, 1992, (7) has
a constitution and bylaws, or other analogous governing documents
that provide for election of the governing board of the association
by its members, (8) offers any benefit plan design that is purchased
to all individual members and employer members in this state, (9)
includes any member choosing to enroll in the benefit plan design
offered to the association provided that the member has agreed to
make the required premium payments, and (10) covers at least 1,000
persons with the carrier with which it contracts. The requirement of
1,000 persons may be met if component chapters of a statewide
association contracting separately with the same carrier cover at
least 1,000 persons in the aggregate.
This subdivision applies regardless of whether a master policy by
an admitted insurer is delivered directly to the association or a
trust formed for or sponsored by an association to administer
benefits for association members.
For purposes of this subdivision, an association formed by a
merger of two or more associations after January 1, 1992, and
otherwise meeting the criteria of this subdivision shall be deemed to
have been in active existence on January 1, 1992, if its predecessor
organizations had been in active existence on January 1, 1992, and
for at least five years prior to that date and otherwise met the
criteria of this subdivision.
(z) "Members of a guaranteed association" means any individual or
employer meeting the association's membership criteria if that person
is a member of the association and chooses to purchase health
coverage through the association. At the association's discretion, it
may also include employees of association members, association
staff, retired members, retired employees of members, and surviving
spouses and dependents of deceased members. However, if an
association chooses to include those persons as members of the
guaranteed association, the association must so elect in advance of
purchasing coverage from a plan. Health plans may require an
association to adhere to the membership composition it selects for up
to 12 months.
(aa) "Affiliation period" means a period that, under the terms of
the health benefit plan, must expire before health care services
under the plan become effective.
10701. (a) For purposes of this chapter, "health benefit plan" does
not include policies or certificates of specified disease or
hospital confinement indemnity provided that the carrier offering
those policies or certificates complies with the following:
(1) The carrier files, on or before March 1 of each year, a
certification with the commissioner that contains the statement and
information described in paragraph (2).
(2) The certification required in paragraph (1) shall contain the
following:
(A) A statement from the carrier certifying that policies or
certificates described in this section (i) are being offered and
marketed as supplemental health insurance and not as a substitute for
hospital or medical expense insurance, health care service plans, or
major medical expense insurance, (ii) the disclosure forms as
described in Section 10603 contains the following statement
prominently on the first page: "This is a supplement to health
insurance. It is not a substitute for hospital or medical expense
insurance, a health maintenance organization (HMO) contract, or major
medical expense insurance," and (iii) are not being offered,
marketed, or sold in a manner that would make the purchase of the
policies contingent upon the sale of any product sold under Sections
10700 and 10718, or under Section 1357 of the Health and Safety Code.
(B) A summary description of each policy or certificate described
in this section, including the average annual premium rates, or range
of premium rates in cases where premiums vary by age, gender, or
other factors, charged for the policies and certificates in this
state.
(3) In the case of a policy or certificate that is described in
this section and that is offered for the first time in this state on
or after January 1, 1997, the carrier files with the commissioner the
information and statement required in paragraph (2) at least 30 days
prior to the date such a policy or certificate is issued or
delivered in this state.
(b) As used in this section, "policies or certificates of
specified disease" and "policies or certificates of hospital
confinement indemnity" mean policies or certificates of insurance
sold to an insured to supplement other health insurance coverage as
specified in this section. An insurer issuing a "policy or
certificate of specified disease" or a "policy or certificate of
hospital confinement indemnity" shall require that the person to be
insured is covered by an individual or group policy or contract that
arranges or provides medical, hospital, and surgical coverage not
designed to supplement other private or governmental plans.
10700. As used in this chapter:
(a) "Agent or broker" means a person or entity licensed under
Chapter 5 (commencing with Section 1621) of Part 2 of Division 1.
(b) "Benefit plan design" means a specific health coverage product
issued by a carrier to small employers, to trustees of associations
that include small employers, or to individuals if the coverage is
offered through employment or sponsored by an employer. It includes
services covered and the levels of copayment and deductibles, and it
may include the professional providers who are to provide those
services and the sites where those services are to be provided. A
benefit plan design may also be an integrated system for the
financing and delivery of quality health care services which has
significant incentives for the covered individuals to use the system.
(c) "Board" means the Major Risk Medical Insurance Board.
(d) "Carrier" means any disability insurance company or any other
entity that writes, issues, or administers health benefit plans that
cover the employees of small employers, regardless of the situs of
the contract or master policyholder. For the purposes of Articles 3
(commencing with Section 10719) and 4 (commencing with Section
10730), "carrier" also includes health care service plans.
(e) "Dependent" means the spouse or child of an eligible employee,
subject to applicable terms of the health benefit plan covering the
employee, and includes dependents of guaranteed association members
if the association elects to include dependents under its health
coverage at the same time it determines its membership composition
pursuant to subdivision (z).
(f) "Eligible employee" means either of the following:
(1) Any permanent employee who is actively engaged on a full-time
basis in the conduct of the business of the small employer with a
normal workweek of at least 30 hours, in the small employer's regular
place of business, who has met any statutorily authorized applicable
waiting period requirements. The term includes sole proprietors or
partners of a partnership, if they are actively engaged on a
full-time basis in the small employer's business, and they are
included as employees under a health benefit plan of a small
employer, but does not include employees who work on a part-time,
temporary, or substitute basis. It includes any eligible employee, as
defined in this paragraph, who obtains coverage through a guaranteed
association. Employees of employers purchasing through a guaranteed
association shall be deemed to be eligible employees if they would
otherwise meet the definition except for the number of persons
employed by the employer. A permanent employee who works at least 20
hours but not more than 29 hours is deemed to be an eligible employee
if all four of the following apply:
(A) The employee otherwise meets the definition of an eligible
employee except for the number of hours worked.
(B) The employer offers the employee health coverage under a
health benefit plan.
(C) All similarly situated individuals are offered coverage under
the health benefit plan.
(D) The employee must have worked at least 20 hours per normal
workweek for at least 50 percent of the weeks in the previous
calendar quarter. The insurer may request any necessary information
to document the hours and time period in question, including, but not
limited to, payroll records and employee wage and tax filings.
(2) Any member of a guaranteed association as defined in
subdivision (z).
(g) "Enrollee" means an eligible employee or dependent who
receives health coverage through the program from a participating
carrier.
(h) "Financially impaired" means, for the purposes of this
chapter, a carrier that, on or after the effective date of this
chapter, is not insolvent and is either:
(1) Deemed by the commissioner to be potentially unable to fulfill
its contractual obligations.
(2) Placed under an order of rehabilitation or conservation by a
court of competent jurisdiction.
(i) "Fund" means the California Small Group Reinsurance Fund.
(j) "Health benefit plan" means a policy or contract written or
administered by a carrier that arranges or provides health care
benefits for the covered eligible employees of a small employer and
their dependents. The term does not include accident only, credit,
disability income, coverage of Medicare services pursuant to
contracts with the United States government, Medicare supplement,
long-term care insurance, dental, vision, coverage issued as a
supplement to liability insurance, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
(k) "In force business" means an existing health benefit plan
issued by the carrier to a small employer.
(l) "Late enrollee" means an eligible employee or dependent who
has declined health coverage under a health benefit plan offered by a
small employer at the time of the initial enrollment period provided
under the terms of the health benefit plan and who subsequently
requests enrollment in a health benefit plan of that small employer,
provided that the initial enrollment period shall be a period of at
least 30 days. It also means any member of an association that is a
guaranteed association as well as any other person eligible to
purchase through the guaranteed association when that person has
failed to purchase coverage during the initial enrollment period
provided under the terms of the guaranteed association's health
benefit plan and who subsequently requests enrollment in the plan,
provided that the initial enrollment period shall be a period of at
least 30 days. However, an eligible employee, another person eligible
for coverage through a guaranteed association pursuant to
subdivision (z), or an eligible dependent shall not be considered a
late enrollee if any of the following is applicable:
(1) The individual meets all of the following requirements:
(A) He or she was covered under another employer health benefit
plan, the Healthy Families Program, the Access for Infants and
Mothers (AIM) Program, or the Medi-Cal program at the time the
individual was eligible to enroll.
(B) He or she certified at the time of the initial enrollment that
coverage under another employer health benefit plan, the Healthy
Families Program, the AIM Program, or the Medi-Cal program was the
reason for declining enrollment provided that, if the individual was
covered under another employer health plan, the individual was given
the opportunity to make the certification required by this
subdivision and was notified that failure to do so could result in
later treatment as a late enrollee.
(C) He or she has lost or will lose coverage under another
employer health benefit plan as a result of termination of employment
of the individual or of a person through whom the individual was
covered as a dependent, change in employment status of the
individual, or of a person through whom the individual was covered as
a dependent, the termination of the other plan's coverage, cessation
of an employer's contribution toward an employee or dependent's
coverage, death of the person through whom the individual was covered
as a dependent, legal separation, or divorce; or he or she has lost
or will lose coverage under the Healthy Families Program, the AIM
Program, or the Medi-Cal program.
(D) He or she requests enrollment within 30 days after termination
of coverage or employer contribution toward coverage provided under
another employer health benefit plan, or requests enrollment within
60 days after termination of Medi-Cal program coverage, AIM Program
coverage, or Healthy Families Program coverage.
(2) The individual is employed by an employer who offers multiple
health benefit plans and the individual elects a different plan
during an open enrollment period.
(3) A court has ordered that coverage be provided for a spouse or
minor child under a covered employee's health benefit plan.
(4) (A) In the case of an eligible employee as defined in
paragraph (1) of subdivision (f), the carrier cannot produce a
written statement from the employer stating that the individual or
the person through whom an individual was eligible to be covered as a
dependent, prior to declining coverage, was provided with, and
signed acknowledgment of, an explicit written notice in boldface type
specifying that failure to elect coverage during the initial
enrollment period permits the carrier to impose, at the time of the
individual's later decision to elect coverage, an exclusion from
coverage for a period of 12 months as well as a six-month preexisting
condition exclusion unless the individual meets the criteria
specified in paragraph (1), (2), or (3).
(B) In the case of an eligible employee who is a guaranteed
association member, the plan cannot produce a written statement from
the guaranteed association stating that the association sent a
written notice in boldface type to all potentially eligible
association members at their last known address prior to the initial
enrollment period informing members that failure to elect coverage
during the initial enrollment period permits the plan to impose, at
the time of the member's later decision to elect coverage, an
exclusion from coverage for a period of 12 months as well as a
six-month preexisting condition exclusion unless the member can
demonstrate that he or she meets the requirements of subparagraphs
(A), (C), and (D) of paragraph (1) or meets the requirements of
paragraph (2) or (3).
(C) In the case of an employer or person who is not a member of an
association, was eligible to purchase coverage through a guaranteed
association, and did not do so, and would not be eligible to purchase
guaranteed coverage unless purchased through a guaranteed
association, the employer or person can demonstrate that he or she
meets the requirements of subparagraphs (A), (C), and (D) of
paragraph (1), or meets the requirements of paragraph (2) or (3), or
that he or she recently had a change in status that would make him or
her eligible and that application for coverage was made within 30
days of the change.
(5) The individual is an employee or dependent who meets the
criteria described in paragraph (1) and was under a COBRA
continuation provision and the coverage under that provision has been
exhausted. For purposes of this section, the definition of "COBRA"
set forth in subdivision (e) of Section 10116.5 shall apply.
(6) The individual is a dependent of an enrolled eligible employee
who has lost or will lose his or her coverage under the Healthy
Families Program, the AIM Program, or the Medi-Cal program and
requests enrollment within 60 days after termination of that
coverage.
(7) The individual is an eligible employee who previously declined
coverage under an employer health benefit plan and who has
subsequently acquired a dependent who would be eligible for coverage
as a dependent of the employee through marriage, birth, adoption, or
placement for adoption, and who enrolls for coverage under that
employer health benefit plan on his or her behalf and on behalf of
his or her dependent within 30 days following the date of marriage,
birth, adoption, or placement for adoption, in which case the
effective date of coverage shall be the first day of the month
following the date the completed request for enrollment is received
in the case of marriage, or the date of birth, or the date of
adoption or placement for adoption, whichever applies. Notice of the
special enrollment rights contained in this paragraph shall be
provided by the employer to an employee at or before the time the
employee is offered an opportunity to enroll in plan coverage.
(8) The individual is an eligible employee who has declined
coverage for himself or herself or his or her dependents during a
previous enrollment period because his or her dependents were covered
by another employer health benefit plan at the time of the previous
enrollment period. That individual may enroll himself or herself or
his or her dependents for plan coverage during a special open
enrollment opportunity if his or her dependents have lost or will
lose coverage under that other employer health benefit plan. The
special open enrollment opportunity shall be requested by the
employee not more than 30 days after the date that the other health
coverage is exhausted or terminated. Upon enrollment, coverage shall
be effective not later than the first day of the first calendar month
beginning after the date the request for enrollment is received.
Notice of the special enrollment rights contained in this paragraph
shall be provided by the employer to an employee at or before the
time the employee is offered an opportunity to enroll in plan
coverage.
(m) "New business" means a health benefit plan issued to a small
employer that is not the carrier's in force business.
(n) "Participating carrier" means a carrier that has entered into
a contract with the program to provide health benefits coverage under
this part.
(o) "Plan of operation" means the plan of operation of the fund,
including articles, bylaws, and operating rules adopted by the fund
pursuant to Article 3 (commencing with Section 10719).
(p) "Program" means the Health Insurance Plan of California.
(q) "Preexisting condition provision" means a policy provision
that excludes coverage for charges or expenses incurred during a
specified period following the insured's effective date of coverage,
as to a condition for which medical advice, diagnosis, care, or
treatment was recommended or received during a specified period
immediately preceding the effective date of coverage.
(r) "Creditable coverage" means:
(1) Any individual or group policy, contract, or program, that is
written or administered by a disability insurer, health care service
plan, fraternal benefits society, self-insured employer plan, or any
other entity, in this state or elsewhere, and that arranges or
provides medical, hospital, and surgical coverage not designed to
supplement other private or governmental plans. The term includes
continuation or conversion coverage but does not include accident
only, credit, coverage for onsite medical clinics, disability income,
Medicare supplement, long-term care, dental, vision, coverage issued
as a supplement to liability insurance, insurance arising out of a
workers' compensation or similar law, automobile medical payment
insurance, or insurance under which benefits are payable with or
without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
(2) The federal Medicare Program pursuant to Title XVIII of the
federal Social Security Act (42 U.S.C. Sec. 1395 et seq.).
(3) The Medicaid Program pursuant to Title XIX of the federal
Social Security Act (42 U.S.C. Sec. 1396 et seq.).
(4) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
(5) 10 U.S.C. Chapter 55 (commencing with Section 1071) (Civilian
Health and Medical Program of the Uniformed Services (CHAMPUS)).
(6) A medical care program of the Indian Health Service or of a
tribal organization.
(7) A state health benefits risk pool.
(8) A health plan offered under 5 U.S.C. Chapter 89 (commencing
with Section 8901) (Federal Employees Health Benefits Program
(FEHBP)).
(9) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)(I) of the federal Public Health
Service Act, as amended by Public Law 104-191, the federal Health
Insurance Portability and Accountability Act of 1996.
(10) A health benefit plan under Section 5(e) of the federal Peace
Corps Act (22 U.S.C. Sec. 2504(e)).
(11) Any other creditable coverage as defined by subdivision (c)
of Section 2701 of Title XXVII of the federal Public Health Service
Act (42 U.S.C. Sec. 300gg(c)).
(s) "Rating period" means the period for which premium rates
established by a carrier are in effect and shall be no less than six
months.
(t) "Risk adjusted employee risk rate" means the rate determined
for an eligible employee of a small employer in a particular risk
category after applying the risk adjustment factor.
(u) "Risk adjustment factor" means the percent adjustment to be
applied equally to each standard employee risk rate for a particular
small employer, based upon any expected deviations from standard
claims. This factor may not be more than 120 percent or less than 80
percent until July 1, 1996. Effective July 1, 1996, this factor may
not be more than 110 percent or less than 90 percent.
(v) "Risk category" means the following characteristics of an
eligible employee: age, geographic region, and family size of the
employee, plus the benefit plan design selected by the small
employer.
(1) No more than the following age categories may be used in
determining premium rates:
Under 30
30-39
40-49
50-54
55-59
60-64
65 and over
However, for the 65 and over age category, separate premium rates
may be specified depending upon whether coverage under the health
benefit plan will be primary or secondary to benefits provided by the
federal Medicare Program pursuant to Title XVIII of the federal
Social Security Act.
(2) Small employer carriers shall base rates to small employers
using no more than the following family size categories:
(A) Single.
(B) Married couple.
(C) One adult and child or children.
(D) Married couple and child or children.
(3) (A) In determining rates for small employers, a carrier that
operates statewide shall use no more than nine geographic regions in
the state, have no region smaller than an area in which the first
three digits of all its ZIP Codes are in common within a county, and
shall divide no county into more than two regions. Carriers shall be
deemed to be operating statewide if their coverage area includes 90
percent or more of the state's population. Geographic regions
established pursuant to this section shall, as a group, cover the
entire state, and the area encompassed in a geographic region shall
be separate and distinct from areas encompassed in other geographic
regions. Geographic regions may be noncontiguous.
(B) In determining rates for small employers, a carrier that does
not operate statewide shall use no more than the number of geographic
regions in the state than is determined by the following formula:
the population, as determined in the last federal census, of all
counties which are included in their entirety in a carrier's service
area divided by the total population of the state, as determined in
the last federal census, multiplied by nine. The resulting number
shall be rounded to the nearest whole integer. No region may be
smaller than an area in which the first three digits of all its ZIP
Codes are in common within a county and no county may be divided into
more than two regions. The area encompassed in a geographic region
shall be separate and distinct from areas encompassed in other
geographic regions. Geographic regions may be noncontiguous. No
carrier shall have less than one geographic area.
(w) "Small employer" means either of the following:
(1) Any person, proprietary or nonprofit firm, corporation,
partnership, public agency, or association that is actively engaged
in business or service that, on at least 50 percent of its working
days during the preceding calendar quarter, or preceding calendar
year, employed at least 2, but not more than 50, eligible employees,
the majority of whom were employed within this state, that was not
formed primarily for purposes of buying health insurance and in which
a bona fide employer-employee relationship exists. In determining
whether to apply the calendar quarter or calendar year test, the
insurer shall use the test that ensures eligibility if only one test
would establish eligibility. However, for purposes of subdivisions
(b) and (h) of Section 10705, the definition shall include employers
with at least three eligible employees until July 1, 1997, and two
eligible employees thereafter. In determining the number of eligible
employees, companies that are affiliated companies and that are
eligible to file a combined income tax return for purposes of state
taxation shall be considered one employer. Subsequent to the issuance
of a health benefit plan to a small employer pursuant to this
chapter, and for the purpose of determining eligibility, the size of
a small employer shall be determined annually. Except as otherwise
specifically provided, provisions of this chapter that apply to a
small employer shall continue to apply until the health benefit plan
anniversary following the date the employer no longer meets the
requirements of this definition. It includes any small employer as
defined in this paragraph who purchases coverage through a guaranteed
association, and any employer purchasing coverage for employees
through a guaranteed association.
(2) Any guaranteed association, as defined in subdivision (y),
that purchases health coverage for members of the association.
(x) "Standard employee risk rate" means the rate applicable to an
eligible employee in a particular risk category in a small employer
group.
(y) "Guaranteed association" means a nonprofit organization
comprised of a group of individuals or employers who associate based
solely on participation in a specified profession or industry,
accepting for membership any individual or employer meeting its
membership criteria which (1) includes one or more small employers as
defined in paragraph (1) of subdivision (w), (2) does not condition
membership directly or indirectly on the health or claims history of
any person, (3) uses membership dues solely for and in consideration
of the membership and membership benefits, except that the amount of
the dues shall not depend on whether the member applies for or
purchases insurance offered by the association, (4) is organized and
maintained in good faith for purposes unrelated to insurance, (5) has
been in active existence on January 1, 1992, and for at least five
years prior to that date, (6) has been offering health insurance to
its members for at least five years prior to January 1, 1992, (7) has
a constitution and bylaws, or other analogous governing documents
that provide for election of the governing board of the association
by its members, (8) offers any benefit plan design that is purchased
to all individual members and employer members in this state, (9)
includes any member choosing to enroll in the benefit plan design
offered to the association provided that the member has agreed to
make the required premium payments, and (10) covers at least 1,000
persons with the carrier with which it contracts. The requirement of
1,000 persons may be met if component chapters of a statewide
association contracting separately with the same carrier cover at
least 1,000 persons in the aggregate.
This subdivision applies regardless of whether a master policy by
an admitted insurer is delivered directly to the association or a
trust formed for or sponsored by an association to administer
benefits for association members.
For purposes of this subdivision, an association formed by a
merger of two or more associations after January 1, 1992, and
otherwise meeting the criteria of this subdivision shall be deemed to
have been in active existence on January 1, 1992, if its predecessor
organizations had been in active existence on January 1, 1992, and
for at least five years prior to that date and otherwise met the
criteria of this subdivision.
(z) "Members of a guaranteed association" means any individual or
employer meeting the association's membership criteria if that person
is a member of the association and chooses to purchase health
coverage through the association. At the association's discretion, it
may also include employees of association members, association
staff, retired members, retired employees of members, and surviving
spouses and dependents of deceased members. However, if an
association chooses to include those persons as members of the
guaranteed association, the association must so elect in advance of
purchasing coverage from a plan. Health plans may require an
association to adhere to the membership composition it selects for up
to 12 months.
(aa) "Affiliation period" means a period that, under the terms of
the health benefit plan, must expire before health care services
under the plan become effective.
10701. (a) For purposes of this chapter, "health benefit plan" does
not include policies or certificates of specified disease or
hospital confinement indemnity provided that the carrier offering
those policies or certificates complies with the following:
(1) The carrier files, on or before March 1 of each year, a
certification with the commissioner that contains the statement and
information described in paragraph (2).
(2) The certification required in paragraph (1) shall contain the
following:
(A) A statement from the carrier certifying that policies or
certificates described in this section (i) are being offered and
marketed as supplemental health insurance and not as a substitute for
hospital or medical expense insurance, health care service plans, or
major medical expense insurance, (ii) the disclosure forms as
described in Section 10603 contains the following statement
prominently on the first page: "This is a supplement to health
insurance. It is not a substitute for hospital or medical expense
insurance, a health maintenance organization (HMO) contract, or major
medical expense insurance," and (iii) are not being offered,
marketed, or sold in a manner that would make the purchase of the
policies contingent upon the sale of any product sold under Sections
10700 and 10718, or under Section 1357 of the Health and Safety Code.
(B) A summary description of each policy or certificate described
in this section, including the average annual premium rates, or range
of premium rates in cases where premiums vary by age, gender, or
other factors, charged for the policies and certificates in this
state.
(3) In the case of a policy or certificate that is described in
this section and that is offered for the first time in this state on
or after January 1, 1997, the carrier files with the commissioner the
information and statement required in paragraph (2) at least 30 days
prior to the date such a policy or certificate is issued or
delivered in this state.
(b) As used in this section, "policies or certificates of
specified disease" and "policies or certificates of hospital
confinement indemnity" mean policies or certificates of insurance
sold to an insured to supplement other health insurance coverage as
specified in this section. An insurer issuing a "policy or
certificate of specified disease" or a "policy or certificate of
hospital confinement indemnity" shall require that the person to be
insured is covered by an individual or group policy or contract that
arranges or provides medical, hospital, and surgical coverage not
designed to supplement other private or governmental plans.
