BILL NUMBER: AB 2259INTRODUCED BILL TEXT INTRODUCED BY Assembly Member Galgiani FEBRUARY 18, 2010 An act to add Section 1349.3 to the Health and Safety Code, and to amend Section 740 of, and to add Section 10112.7 to, the Insurance Code, relating to health care coverage. LEGISLATIVE COUNSEL'S DIGEST AB 2259, as introduced, Galgiani. Health care coverage: nonprofit charitable organizations. Existing law, the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act), provides for the licensure and regulation of health care service plans, as defined, by the Department of Managed Health Care. Existing law also provides for the regulation of health insurers by the Department of Insurance and requires insurers to obtain a certificate of authority from the Insurance Commissioner. Existing law provides an exemption from those licensure and certification requirements for plans operated by a public entity or joint labor management trust if, among other requirements, the plan maintains a fiscally sound operation and makes adequate provision against the risk of insolvency, as evidenced by financial statements submitted to the Director of the Department of Managed Health Care, as specified. This bill would exempt a plan operated by a joint venture formed by 2 or more nonprofit charitable organizations, as defined, from the licensure and certification requirements if the plan satisfies certain criteria, including maintaining a fiscally sound operation and making adequate provision against the risk of insolvency, as evidenced by financial statements submitted to the Director of the Department of Managed Health Care, as specified, and submitting a declaration under penalty of perjury stating the plan's compliance with those criteria. The bill would also authorize a joint venture formed between 2 or more nonprofit charitable organizations to contract with a health care service plan or health insurer for the purpose of providing health care coverage to the employees and retirees, and dependents thereof, of the participating nonprofit charitable organizations. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 1349.3 is added to the Health and Safety Code, to read: 1349.3. (a) For purposes of this section, "nonprofit charitable organization" means a corporation incorporated pursuant to the Nonprofit Corporation Law (Division 2 (commencing with Section 5000) of Title 1 of the Corporations Code) that is exempt from taxation pursuant to Section 501(c) of the Internal Revenue Code and Section 23710d of the Revenue and Taxation Code. (b) A health care service plan, including a self-insured reimbursement plan that pays for or reimburses any part of the cost of health care services, operated by a joint venture formed by two or more nonprofit charitable organizations that satisfies all of the following criteria is exempt from this chapter: (1) Provides services or reimbursement only to employees, retirees, and the dependents of those employees and retirees, of any participating nonprofit charitable organization, but not to the general public. (2) Provides funding for the program. (3) Provides that providers are reimbursed solely on a fee-for-service basis, so that providers are not at risk in contracting arrangements. (4) Complies with Section 1378 and, to the extent that a plan contracts directly with providers for health care services, complies with Section 1379. (5) Does not reduce or change current benefits except in accordance with collective bargaining agreements, or as otherwise authorized by the governing body in the case of unrepresented employees, and provides, pays for, or reimburses at least part of the cost of all basic health care services as defined in subdivision (b) of Section 1345. Plans covering only a single specialized health care service, including dental, vision, or mental health services, shall not be required to cover all basic health care services. (6) Refrains from any conduct that constitutes fraud or dishonest dealing or unfair competition, as defined by Section 17200 of the Business and Professions Code, and notifies enrollees of their right to file complaints with the director regarding any violation of this exemption. (7) Maintains a fiscally sound operation and makes adequate provision against the risk of insolvency so that enrollees are not at risk, individually or collectively, as evidenced by audited financial statements submitted to the director as of the end of the plan's fiscal year, within 180 days after the close of that fiscal year. The financial statements shall be accompanied by a report, certificate, or opinion of an independent certified public accountant. The financial statements shall be prepared in accordance with generally accepted accounting principles. The audit shall be conducted in accordance with generally accepted auditing standards. Upon request, the governing body of the plan shall provide copies thereof, without charge, to any enrollee or recognized and participating nonprofit charitable organization. (8) Submits with the annual financial statements required under paragraph (7), a declaration, which shall conform to Section 2015.5 of the Code of Civil Procedure, executed by a plan official authorized by the governing body of the plan, that the plan complies with this subdivision. (b) The director's responsibilities under this section shall be limited to enforcing compliance with this section. Nothing in this section shall impair or impede the director's enforcement authority or the remedies available under this chapter, including, but not limited to, the termination of the plan's exemption under this section. (c) Nothing in this section shall be construed to prohibit a recognized and participating nonprofit charitable organization from filing a complaint with the director regarding a violation of this section. (d) A joint venture formed between two or more nonprofit charitable organizations may contract with a health care service plan for the purpose of providing health care coverage to the employees and retirees, and dependents thereof, of the participating nonprofit charitable organizations. Notwithstanding subdivision (b), all requirements of this chapter shall apply to a contract entered into pursuant to this subdivision. SEC. 2. Section 740 of the Insurance Code is amended to read: 740. (a) Notwithstanding any other provision of law, and except as provided herein, any person or other entity that provides coverage in this state for medical, surgical, chiropractic, physical therapy, speech pathology, audiology, professional mental health, dental, hospital, or optometric expenses, whether the coverage is by direct payment, reimbursement, or otherwise, shall be presumed to be subject to the jurisdiction of the department unless the person or other entity shows that while providing the services it is subject to the jurisdiction of another agency of this or another state or the federal government. (b) A person or entity may show that it is subject to the jurisdiction of another agency of this or another state or the federal government by providing to the commissioner the appropriate certificate or license issued by the other governmental agency that permits or qualifies it to provide those services for which it is licensed or certificated. (c) Any person or entity that is unable to show that it is subject to the jurisdiction of another agency of this or another state or the federal government, shall submit to an examination by the commissioner to determine the organization and solvency of the person or the entity, and to determine whether the person or entity is in compliance with the applicable provisions of this code, and shall be required to obtain a certificate of authority to do business in California and be required to meet all appropriate reserve, surplus, capital, and other necessary requirements imposed by this code for all insurers. (d) Any person or entity unable to show that it is subject to the jurisdiction of another agency of this or another state or the federal government shall be subject to all appropriate provisions of this code regarding the conduct of its business. (e) The department shall prepare and maintain for public inspection a list of those persons or entities described in subdivision (a) that are not subject to the jurisdiction of another agency of this or another state or the federal government and that the department knows to be operating in this state. There shall be no liability of any kind on the part of the state, the department, and its employees for the accuracy of the list or for any comments made with respect to it. (f) Any administrator licensed by the department who advertises or administers coverage in this state described in subdivision (a), that is provided by any person or entity described in subdivision (c), and where the coverage does not meet all pertinent requirements specified in this code and that is not provided or completely underwritten, insured or otherwise fully covered by an admitted life or disability insurer, hospital service plan or health care service plan, shall advise and disclose to any purchaser, prospective purchaser, covered person or entity, and any production agency licensed by the department involved in the transaction, all financial and operational information relative to the content and scope of the plan and, specifically, as to the lack of insurance or other coverage. Any production agency obtaining knowledge of any coverage relative to the content and scope of a hospital service plan or health care service plan, as required under this subdivision, shall advise and disclose to any purchaser, prospective purchaser, covered person or entity, the knowledge regarding the content and scope of the plan and, specifically, as to the lack of insurance by an admitted carrier or other qualified plan. (g) A health care service plan, as defined in Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code, shall not be subject to this section. (h) The department shall notify, in writing, the Director of the Department of Managed Health Care whenever it determines that a multiple employer trust qualifies as a health care service plan subject to Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code. (i) Any health care service plan, including a self-insured reimbursement plan that pays for or reimburses any part of the cost of health care services, operated by any city, county, city and county, public entity, or political subdivision, or a public joint labor management trust as described in subdivision (c) of Section 1349.2 of the Health and Safety Code, that is exempt pursuant to Section 1349.2 of the Health and Safety Code from the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code), is also exempt from this code. (j) Any health care service plan, including a self-insured reimbursement plan that pays for or reimburses any part of the cost of health care services, operated by a joint venture formed by two or more nonprofit charitable organizations as described in subdivision (b) of Section 1349.3 of the Health and Safety Code, that is exempt pursuant to Section 1349.3 of the Health and Safety Code from the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code), is also exempt from this code. SEC. 3. Section 10112.7 is added to the Insurance Code, to read: 10112.7. (a) For purposes of this section, "nonprofit charitable organization" means a corporation incorporated pursuant to the Nonprofit Corporation Law (Division 2 (commencing with Section 5000) of Title 1 of the Corporations Code) that is exempt from taxation pursuant to Section 501(c) of the Internal Revenue Code and Section 23710d of the Revenue and Taxation Code. (b) A joint venture formed between two or more nonprofit charitable organizations may contract with a health insurer for the purpose of providing health care coverage to the employees and retirees, and dependents thereof, of the participating nonprofit charitable organizations. All requirements of this code shall apply to a contract entered into pursuant to this subdivision. SEC. 4. No reimbursement is required by this act pursuant to Section 6 of Article XIII B 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 XIII B of the California Constitution.