Individual health care coverage.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of its provisions a crime. Existing law provides for the regulation of health insurers by the Department of Insurance. Existing law prohibits the Director of the Department of Managed Health Care and the Insurance Commissioner from approving a plan contract or health insurance policy without a finding that the application conforms to specified requirements. Existing law prohibits the cancellation or nonrenewal of an enrollment or subscription by a health care service plan except in specified circumstances, including for nonpayment, fraud or deception in the use of services or facilities, or for good cause as agreed upon in the contract. Existing law prohibits the nonrenewal of individual health benefit plans by a health insurer except in specified circumstances, including for nonpayment or for fraud or intentional misrepresentation of material fact. Existing law subjects health care service plans to various fines and administrative penalties for failing to comply with specified provisions of the act and requires that certain fines and administrative penalties be deposited in the Managed Care Administrative Fines and Penalties Fund. Under existing law, the Managed Risk Medical Insurance Board manages the California Major Risk Medical Insurance Program (MRMIP) to provide major risk medical insurance coverage to eligible persons who have been rejected for health care coverage by at least one private health plan. Existing law creates the Major Risk Medical Insurance Fund, and continuously appropriates the fund to the board for purposes of the program. This bill would require the director and the commissioner to jointly, by regulation, establish standard information and health history questions to be used by health care service plans and health insurers for their individual health care coverage application forms, as specified, and, on and after January 1, 2011, would require all individual health care service plan and health insurance applications to be reviewed and approved by the director or the commissioner, respectively, before use by a health care service plan or health insurer. This bill would require all plans and insurers to complete medical underwriting prior to issuing a health care service plan contract or health insurance policy, and to meet certain requirements with regard to medical underwriting, including a requirement that the plan or insurer review each application for accuracy and completeness, review specified claims information, make prescription drug database inquiries, and identify and inquire of the applicant about any omissions, ambiguities, or inconsistencies. The bill would prohibit a plan or insurer from canceling or rescinding an individual health care service plan contract or individual health insurance policy unless specified conditions are met with regard to whether an applicant intentionally misrepresented or intentionally omitted material information in the plan or policy application, as specified, and would provide for cancellation or nonrenewal for nonpayment. The bill would also require a plan or insurer to annually report to the department the total number of individual health care service plan contracts or individual health insurance policies issued, canceled, or rescinded pursuant to these provisions during the preceding calendar year. The bill would require a health care service plan or health insurer to provide specified notices to subscribers and enrollees and insureds and policyholders. The bill would, commencing January 1, 2011, establish in the Department of Managed Health Care and the Department of Insurance an independent review process for the review of health care service plans' and health insurers' decisions to cancel or rescind individual health care service plan contracts and health insurance policies, and would impose administrative penalties upon a plan or insurer that engages in any conduct that has the effect of prolonging an independent review process or that fails to implement an independent review process decision. The bill would require that penalties collected from plans be deposited into the Managed Care Administrative Fines and Penalties Fund, and that penalties collected from insurers be deposited into the Major Risk Medical Insurance Fund for purposes of MRMIP, subject to appropriation by the Legislature. The bill would exempt certain types of plans and policies from the bill's requirements and would enact related provisions. Because this bill would impose additional requirements on health care service plans, the willful violation of which would be a crime, it would impose a state-mandated local program. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason.