California just completed a busy 2021 legislative session, imposing a variety of new health insurance mandates. Here are the highlights. Please note that as with any state insurance mandate, the new California mandates do not apply to self-insured ERISA plans, nor to insured plans that are not subject to California insurance law.
Lockton comment: Generally, California insurance law applies to insurance contracts issued or delivered in California or issued and delivered elsewhere but more than half the employer/contract holder’s employees are in California. Whether California insurance law applies to a commercial medical insurance policy is for the insurer issuing that policy, not the employer/contract holder, to determine.
Monthly disclosure of progress toward deductibles and out-of-pocket maximums
Effective for insurance contracts issued or renewed on or after July 1, 2022, group health plans must establish a system to track progress an enrollee is making toward satisfaction of deductibles and out-of-pocket (OOP) maximums, and must notify enrollees monthly, if they’ve received covered care under the plan for that month, of their progress toward these amounts.
Lockton comment: Similar federal transparency rules are taking effect in 2023 that will also require all plans to track, in real time, changes in the amount of an enrollee’s deductible and OOP maximum left to satisfy and be able to produce this information through an online self-service tool and provide it as part of an advance explanation of benefits. However, this California rule will go beyond the federal requirements and require plans to proactively send monthly notices to at least some enrollees informing them of where they stand on their progress toward meeting their deductibles and OOP maximum.
If the plan design includes multiple annual deductibles, then progress toward each deductible must be tracked and included in the monthly statement for enrollees who received care in that month. The monthly statements must continue to be issued to an enrollee for any month in which the enrollee received covered care until the cost-sharing amounts have been satisfied.
Paper statements must be delivered via mail unless the individual has elected to receive notices electronically. Any previous consents to electronic notices obtained by the plan may be relied upon to send these monthly accrual statements electronically, but plan participants may also opt back into receiving paper statements at any time.
Lockton comment: The California rule allows affected plans and health insurance carriers to send these accrual updates with explanation of benefits statements, and we suspect this is how insurers will make these disclosures.
The bill also requires the plan or health insurance carrier to notify enrollees of their rights under the bill, such as how to request information and how to opt out of mailed notices.
COVID-19 testing and preventive services
Insured group health policies subject to California insurance law that provide coverage for hospital, medical or surgical benefits must now cover more extensive benefits related to COVID-19 testing and treatment while the pandemic is still designated as a public emergency by the governor.
Insured plans must cover the cost of COVID-19 testing whether it be for diagnostic or screening purposes without imposing any cost sharing on plan participants regardless of whether the care was delivered in-network or out-of-network.
Lockton comment: The federal rules only require group health plans (including grandfathered plans) to cover testing as a diagnostic tool pursuant to a medical provider’s request and only while the national public health emergency declaration (currently extended until Jan. 16, 2022) is in effect. This state mandate requires plans subject to California insurance law to cover COVID-19 testing for mere screening purposes such as those being tested for employment reasons and have no symptoms. This mandate will remain in place for in-network benefits for the duration of the governor’s public health emergency declaration and will not automatically expire when the feds lift the national emergency. The state will only block plans from applying cost sharing to out-of-network (OON) testing expenses for the duration of the federal public health emergency.
Similar to the federal rules, California insurance plans subject to this mandate must pay to in-network providers the negotiated rate for COVID-19 testing, including any cost-sharing amounts the provider would otherwise be entitled to from the patient. OON providers must be paid at least a reasonable reimbursement rate by the plan as determined in comparison with the prevailing market rates within the geographic region where the care was delivered. Likewise, the OON provider must accept the reimbursement rate as payment in full and cannot balance bill the patient for additional amounts.
Lockton comment: While the federal mandate to cover COVID-19 diagnostic testing is in effect, the plan is required by federal law to pay OON providers either a negotiated rate or the rate published by that provider, an amount that is often larger than the prevailing market rate in the geographic area.
Insured plans subject to the California mandate must also cover any items, services or immunizations used to prevent or mitigate COVID-19 (regardless of whether the care was delivered in-network or OON) without cost sharing or preauthorization requirements. This includes evidence-based items or services that have an “A” or “B” rating in the current recommendations of the United States Preventive Services Task Force or an immunization that is recommended by the CDC’s Advisory Committee on Immunization Practices. These provisions also apply retroactively to March 4, 2020, when the governor declared a COVID-19 state of emergency. As with the testing mandate, the state will only block plans from applying cost sharing to OON expenses for the duration of the federal public health emergency.
Coverage for any new items or services added to the preventive service category must be covered no later than 15 business days after the date the recommendations are adopted by the Task Force or the Advisory Committee.
Lockton comment: This state mandate related to coverage of immunizations is broader than the federal rules as it applies to all insured plans subject to California insurance law and, unlike the federal preventive care mandate, does not exempt grandfathered plans from covering these preventive services including the COVID-19 vaccination. As with the testing mandate mentioned above, the preventive services mandate will be in effect for as long as the governor maintains the public health emergency declaration for the state even after the feds rescind the federal public health emergency declaration.
Although these new California rules were enacted because of COVID-19, these coverage rules will also apply to any future disease that is declared a public health emergency by the governor, and to treatment for that disease recommended by the United States Preventive Services Task Force or the federal Centers for Disease Control and Prevention.
Coverage for pediatric mental health services
Insured plans subject to California insurance law that cover pediatric services and preventive care must also cover screenings for “adverse childhood experiences” (ACEs) beginning for policies issued or renewed on or after Jan. 1, 2022. The new law defines an ACE as an event, a series of events or a set of circumstances that a child experiences as physically or emotionally harmful or threatening and that has lasting adverse effects on the individual’s functioning and physical, social, emotional or spiritual well-being. Screening for ACEs will be conducted by a medical professional and cost sharing may apply. Future regulations may clarify this coverage requirement.
Lockton comment: It is worth noting that this mandate would require all insured plans subject to California law to cover these services. This presumably means these benefits, to the extent they are mental health services, must be covered in accordance with the federal mental health parity laws.
Next steps
Plan sponsors purchasing or renewing health insurance policies subject to California law may want to dialogue with these carriers as part of their contract negotiations to determine when and how these new rules will be addressed in 2022.
Download alert (opens a new window)Not legal advice: Nothing in this alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Compliance Services group are not privileged under the attorney-client privilege.
