AB 224 fixes the State’s essential health benefits (EHBs) definition by tying California’s minimum benefit package to the Kaiser Foundation Health Plan Small Group HMO 30 plan as offered in Q1 2014 and to specific pre-2012 California statutory mandates. The bill also conditions a package of additional benefits — detailed infertility services, a set of durable medical equipment, and expanded hearing coverage — on federal approval of a new state benchmark plan and phases those in beginning January 1, 2027.
The statute clarifies substitution rules, treatment-limitation limits, enforcement paths for misrepresenting EHB compliance, and regulatory authority for the commissioner (with consultation from the Department of Managed Health Care). By anchoring EHBs to a specific historical plan and enumerating added benefits, AB 224 reshapes what individual and small-group insurers must cover and creates timing and implementation choices with real premium and compliance implications for carriers and overseers.
At a Glance
What It Does
Specifies that individual and small-group policies must cover EHBs equivalent to the Kaiser Small Group HMO 30 plan as offered in Q1 2014, incorporates California statutory mandates enacted before 2012, and—if HHS approves California’s 2025 benchmark submission—adds detailed infertility services, specified durable medical equipment, and hearing benefits starting January 1, 2027. It limits substitutions, allows a narrow formulary substitution exception, and subjects misrepresentations to existing enforcement provisions.
Who It Affects
State-regulated insurers offering individual and small-group coverage in and out of Covered California, their brokers and marketing agents, the Department of Insurance (commissioner) and the Department of Managed Health Care (consultation role), and patients who need fertility care, durable medical equipment, hearing services, pediatric vision and oral care.
Why It Matters
Picking a concrete 2014 benchmark plus a conditional 2027 expansion removes ambiguity about minimum covered services but shifts cost and compliance risk onto carriers and regulators. The bill also creates a predictable (but conditional) entitlement pathway for fertility and certain long-term medical devices that have been disputed in benefit design debates.
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What This Bill Actually Does
AB 224 defines California’s essential health benefits by anchoring them to two things: the benefit categories listed in federal law (ACA Section 1302(b)) and a specific historical benchmark plan — the Kaiser Foundation Health Plan Small Group HMO 30 as it existed in the first quarter of 2014. The bill layers on California statutes that required certain benefits before December 31, 2011, so those state mandates remain part of the EHB mix.
For plan designers and compliance teams, the bill creates a single, statutory reference point for what must be included in individual and small-group products offered on and off the state exchange.
The statute contains a path to expand the benchmark package beginning January 1, 2027, but only if the U.S. Department of Health and Human Services approves a new benchmark plan the state submits in 2025. Those conditional additions are specific and prescriptive: a comprehensive list of infertility evaluation and treatment services (including multiple retrievals and embryo transfers, cryopreservation/storage rules, donor gametes/eggs, and surrogacy-related coverage), named durable medical equipment and assistive technology items, and defined hearing services (annual exam and one hearing aid per ear every three years).
The bill also mandates that habilitative services be treated the same as rehabilitative services and requires mental health and substance use disorder coverage to comply with federal parity law.On the mechanics side, AB 224 curbs benefit substitutions — insurers cannot swap out required benefits for actuarially equivalent alternatives except in a narrow instance for prescription drug formularies, and then only where substitution would not trigger any state obligation to pay costs. The bill preserves existing enforcement tools for false EHB marketing and explicitly applies to policies sold both inside and outside the health exchange.
It gives the insurance commissioner authority to issue guidance (not subject to the Administrative Procedure Act until January 1, 2027) and to promulgate regulations after consultation with the Department of Managed Health Care, creating a two-stage regulatory pathway for implementation.
The Five Things You Need to Know
The bill makes the Kaiser Foundation Health Plan Small Group HMO 30 (federal product ID 40513CA035) as offered in Q1 2014 the statutory baseline for California’s EHBs.
If HHS approves a new federal benchmark submission made on California’s behalf in 2025, then starting January 1, 2027 the EHB benchmark must include a detailed package of infertility services that specifies counts (e.g.
three gamete retrievals, three embryo creations, unlimited gamete storage, two years embryo storage, ten donor eggs, two vials donor sperm) and surrogacy-related coverage.
The conditional 2027 additions also name specific durable medical equipment (mobility devices, augmented communications devices, CPAPs, portable oxygen, hospital beds) and a hearing benefit package (annual exam plus one hearing aid per ear every three years).
The bill prohibits insurers from substituting required benefits for other benefits, except it allows a carrier to replace the benchmark plan’s drug formulary with its own only if federal rules permit it and the substitution does not create a state obligation to pay costs.
The statute enforces EHB compliance and misrepresentation under existing enforcement mechanisms (cross-referenced to Section 790.03 and related provisions) and applies to coverage sold both inside and outside the California Health Benefit Exchange.
Section-by-Section Breakdown
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Core definition: ACA categories plus California benchmark
This subsection supplies the operative definition of essential health benefits: it preserves the federal ACA categories (ambulatory care, hospitalization, maternity, behavioral health, prescription drugs, rehabilitative/habilitative, lab, preventive, pediatric oral and vision, etc.) and then pins the state’s EHB content to the Kaiser Small Group HMO 30 plan as offered in Q1 2014. Practically, carriers must map their covered services to that historical package and to listed California mandates enacted before 2012 when demonstrating EHB compliance.
Incorporation of pre-2012 California mandates and conflict rule
The bill explicitly incorporates a long list of California Health and Safety Code mandates (for example, contraceptive drug coverage, cancer screening, maternity stays, prosthetics, autism/behavioral health treatment, hospice, organ transplants for HIV, and others) that were enacted before December 31, 2011. If the historical Kaiser plan omits or conflicts with those statutes, the older state statutes control unless this section says otherwise. That creates a legal hierarchy: federal categories, the 2014 benchmark, and pre-2012 state mandates as controlling references for coverage content.
Mental health parity and habilitative services parity
The bill requires coverage of mental health and substance use disorder services to comply with the federal Mental Health Parity and Addiction Equity Act (MHPAEA) and related federal guidance, and it treats habilitative services the same as rehabilitative services. For insurers, that means plan design, limits, and medical management applied to habilitative services must mirror rehabilitative care rules, and MHPAEA compliance testing and documentation are expressly mandated.
Conditional 2027 additions: infertility, DME, hearing
This clause creates a contingent expansion: if HHS approves a new state benchmark submission made in 2025, then as of January 1, 2027 the benchmark must include a laundry list of infertility services (detailed counts for retrievals, embryo creation and transfers, cryopreservation and storage rules, donor gametes and eggs, and surrogacy-related coverage), specified durable medical equipment and assistive devices, and defined hearing benefits. The provision is unusually prescriptive about counts and storage durations, which limits carrier flexibility and permits precise actuarial modeling but also raises questions about cost and utilization forecasting.
Treatment limits, substitution rules, and formulary exception
Treatment limitations in new plans cannot be more restrictive than those in the corresponding benchmark elements, and insurers may not substitute other benefits for those required by statute. The lone exception permits a carrier to use its own prescription drug formulary instead of the benchmark formulary if federal law allows and if the substitution would not impose a state funding obligation. That creates a narrow pathway for formulary alignment but preserves the general anti-substitution rule to maintain benefit consistency.
Marketing, enforcement, and scope
Insurers and their agents may not market or sell products as EHB-compliant unless they meet all requirements of this section, and the provision ties enforcement to existing Insurance Code remedies (the enforcement mechanism in Section 790.03 and related sections). The subsection expressly applies to policies sold both inside and outside the California Health Benefit Exchange, eliminating a potential regulatory gap between exchange and off-exchange products.
Regulatory authority and cost-sharing/network limits
The insurance commissioner may issue guidance on compliance before January 1, 2027 (guidance not subject to the Administrative Procedure Act) and may later promulgate regulations under the APA after consulting with the Department of Managed Health Care. The statute also clarifies that it does not import the identified benchmark plans’ cost-sharing or network configurations onto other policies except where state law already requires it, limiting the bill’s impact on plan pricing architecture while preserving substantive benefit mandates.
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Explore Healthcare in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Patients seeking infertility treatment: the conditional 2027 package specifies a broad, quantified set of fertility services and surrogacy-related coverage that would materially increase covered reproductive care for those insured in individual and small-group markets.
- People who need durable medical equipment and assistive devices: named items (mobility devices, AAC devices, CPAPs, portable oxygen, hospital beds) become part of the EHB baseline if the federal benchmark approval condition is met, improving coverage predictability for long-term device needs.
- Children requiring vision and oral care: the bill incorporates the Federal Employees Dental and Vision Insurance Program vision benefits and Medi‑Cal pediatric dental benefits as reference points, which can expand access to pediatric vision and orthodontic services under EHB rules.
- Behavioral health service users: by expressly applying MHPAEA and aligning habilitative services to rehabilitative ones, the bill strengthens parity protections and access pathways for mental health and developmental services.
Who Bears the Cost
- Insurers offering individual and small-group products: carriers must adjust benefit packages, medical management protocols, and actuarial assumptions to conform to the 2014 benchmark and any 2027 additions, which is likely to increase administrative burden and may raise premiums.
- Small‑group employers and employees: premium impacts from newly mandated benefits (particularly the fertility and equipment packages) could increase employer contributions or employee premium share in the small-group market.
- State regulators (Department of Insurance and Department of Managed Health Care): the commissioner and DMHC will absorb implementation and oversight duties, including guidance, rulemaking, consultations, and enforcement actions tied to demanding and technical benefit definitions.
- Consumers in excepted or grandfathered plans: because the statute explicitly excludes excepted benefits and grandfathered plans, those enrollees will not receive the new mandated expansions, creating an uneven coverage landscape across similar insured populations.
Key Issues
The Core Tension
The central dilemma is between consumer-facing clarity and expanded benefits on one hand, and market and fiscal strain on the other: AB 224 secures concrete, broader entitlements (notably for infertility and assistive devices) but does so in a way that pushes cost and compliance burdens onto insurers, employers, and regulators while constraining the state from directly funding those new obligations.
AB 224 tries to thread a narrow needle: it locks EHB content to a historical commercial product and to a set of older California statutes, then contingently expands that package based on a future federal decision. That design reduces ambiguity about what constitutes an EHB but raises practical implementation questions.
Mapping current plan catalogs to a 2014 HMO contract — including services that may be differently defined now — will require detailed benefit-mapping exercises, potential contract amendments, and likely disputes about whether a modern service matches a historical line item.
The fertility and equipment additions are unusually granular (specified counts, storage durations, and device lists). While this gives clarity to providers and patients, it also transfers cost and utilization risk to carriers and the market.
The bill repeatedly limits the state’s obligation to defray costs and bars coverage obligations that would require the state to fund them, creating an ambiguous allocation: carriers may absorb costs through premiums, employers may see higher rates, and some low-income populations could rely on Medi‑Cal (outside this statute) for access. Finally, the commissioner’s authority to issue non‑APA guidance until 2027 expedites interpretation but reduces formal public comment and judicial record-building, potentially inviting litigation over substantive interpretations.
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