2005 California Health and Safety Code Sections 1389.1-1389.3 Article 7.5. Underwriting Practices

HEALTH AND SAFETY CODE
SECTION 1389.1-1389.3

1389.1.  (a) The director shall not approve any plan contract unless
the director finds that the application conforms to both of the
following requirements:
   (1) All applications for coverage which include health-related
questions shall contain clear and unambiguous questions designed to
ascertain the health condition or history of the applicant.
   (2) The application questions related to an applicant's health
shall be based on medical information that is reasonable and
necessary for medical underwriting purposes.  The  application shall
include a prominently displayed notice that shall read:
   "California law prohibits an HIV test from being required or used
by health care service plans as a condition of obtaining coverage."
   (b) Nothing in this section shall authorize the director to
establish or require a single or standard application form for
application questions.
1389.2.  At the request of the director, a health care service plan
shall provide a written statement of the actuarial basis for any
medical underwriting decision on any application form, or contract
issued or delivered to, or denied a resident of this state.
1389.25.  (a) (1) This section shall apply only to a full service
health care service plan offering health coverage in the individual
market in California and shall not apply to a specialized health care
service plan, a health care service plan contract in the Medi-Cal
program (Chapter 7 (commencing with Section 14000) of Part 3 of
Division 9 of the Welfare and Institutions Code), a health care
service plan conversion contract offered pursuant to Section 1373.6,
a health care service plan contract in the Healthy Families Program
(Part 6.2 (commencing with Section 12693) of Division 2 of the
Insurance Code), or a health care service plan contract offered to a
federally eligible defined individual under Article 4.6 (commencing
with Section 1366.35).
   (2) A local initiative, as defined in subdivision (v) of Section
53810 of Title 22 of the California Code of Regulations, that is
awarded a contract by the State Department of Health Services
pursuant to subdivision (b) of Section 53800 of Title 22 of the
California Code of Regulations, shall not be subject to this section
unless the plan offers coverage in the individual market to persons
not covered by Medi-Cal or the Healthy Families Program.
   (b) (1) A health care service plan that declines to offer coverage
or denies enrollment for an individual or his or her dependents
applying for individual coverage or that offers individual coverage
at a rate that is higher than the standard rate, shall provide the
individual applicant with the specific reason or reasons for the
decision in writing at the time of the denial or offer of coverage.
   (2)  No change in the premium rate or coverage for an individual
plan contract shall become effective unless the plan has delivered a
written notice of the change at least 30 days prior to the effective
date of the contract renewal or the date on which the rate or
coverage changes. A notice of an increase in the premium rate shall
include the reasons for the rate increase.
   (3) The written notice required pursuant to paragraph (2) shall be
delivered to the individual contractholder at his or her last
address known to the plan, at least 30 days prior to the effective
date of the change. The notice shall state in italics either the
actual dollar amount of the premium rate increase or the specific
percentage by which the current premium will be increased. The notice
shall describe in plain, understandable English any changes in the
plan design or any changes in benefits, including a reduction in
benefits or changes to waivers, exclusions, or conditions, and
highlight this information by printing it in italics. The notice
shall specify in a minimum of 10-point bold typeface, the reason for
a premium rate change or a change to the plan design or benefits.
   (4) If a plan rejects an applicant or the dependents of an
applicant for coverage or offers individual coverage at a rate that
is higher than the standard rate, the plan shall inform the applicant
about the state's high-risk health insurance pool, the California
Major Risk Medical Insurance Program (Part 6.5 (commencing with
Section 12700) of Division 2 of the Insurance Code). The information
provided to the applicant by the plan shall specifically include the
program's toll-free telephone number and its Internet Web site
address. The requirement to notify applicants of the availability of
the California Major Risk Medical Insurance Program shall not apply
when a health plan rejects an applicant for Medicare supplement
coverage.
   (c) A notice provided pursuant to this section is a private and
confidential communication and at the time of application, the plan
shall give the individual applicant the opportunity to designate the
address for receipt of the written notice in order to protect the
confidentiality of any personal or privileged information.
1389.3.  No health care service plan shall engage in the practice of
postclaims underwriting.  For purposes of this section, "postclaims
underwriting" means the rescinding, canceling, or limiting of a plan
contract due to the plan's failure to complete medical underwriting
and resolve all reasonable questions arising from written information
submitted on or with an application before issuing the plan
contract.  This section shall not limit a plan's remedies upon a
showing of willful misrepresentation.
1389.3.  (a) A full service health care service plan that markets
and sells individual health plan contracts shall be subject to this
section.
   (b) A health care service plan subject to this section shall have
written policies, procedures, or underwriting guidelines establishing
the criteria and process whereby the plan makes its decision to
provide or to deny coverage to individuals applying for coverage and
sets the rate for that coverage. These guidelines, policies, or
procedures shall assure that the plan rating and underwriting
criteria comply with Sections 1365.5 and 1389.1 and all other
applicable provisions of state and federal law.
   (c) On or before June 1, 2006, and annually thereafter, every
health care service plan shall file with the department a general
description of the criteria, policies, procedures, or guidelines the
plan uses for rating and underwriting decisions related to individual
health plan contracts, which means automatic declinable health
conditions, health conditions that may lead to a coverage decline,
height and weight standards, health history, health care utilization,
lifestyle, or behavior that might result in a decline for coverage
or severely limit the plan products for which they would be eligible.
A plan may comply with this section by submitting to the department
underwriting materials or resource guides provided to plan solicitors
or solicitor firms, provided that those materials include the
information required to be submitted by this section.
   (d) Commencing September 1, 2006, the director shall post on the
department's Web site, in a manner accessible and understandable to
consumers, general, noncompany specific information about rating and
underwriting criteria and practices in the individual market and
information about the Major Risk Medical Insurance Program. The
director shall develop the information for the Web site in
consultation with the Department of Insurance to enhance the
consistency of information provided to consumers. Information about
individual health coverage shall also include the following
notification:
   "Please examine your options carefully before declining group
coverage or continuation coverage, such as COBRA, that may be
available to you. You should be aware that companies selling
individual health insurance typically require a review of your
medical history that could result in a higher premium or you could be
denied coverage entirely."
   (e) Nothing in this section shall authorize public disclosure of
company-specific rating and underwriting criteria and practices
submitted to the director.


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