BILL NUMBER: AB 1324	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member De La Torre

                        FEBRUARY 23, 2007

   An act to amend Sections 1371.8 and 1389.3 of the Health and
Safety Code, and to amend Sections 796.04, 10380, and 10384 of the
Insurance Code, relating to health care coverage.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1324, as introduced, De La Torre. Health care coverage:
rescinded coverage.
   Existing law provides for regulation of health care service plans
by the Director of Managed Health Care. Existing law provides for the
regulation of health insurers by the Insurance Commissioner.
   Existing law provides that a health care service plan or a health
insurer that authorizes a specific type of treatment by a health care
provider shall not rescind or modify this authorization after the
provider renders the health care service in good faith and pursuant
to the authorization.
   This bill would define "authorizes" and "authorization" under
these provisions.
   Existing law prohibits postclaims underwriting, as defined, by
health care service plans and health insurers, but does not limit a
plan's or insurer's remedies in case of willful misrepresentation.
    This bill would provide that a plan or an insurer has the burden
of demonstrating to the director or the commissioner, as applicable,
that an enrollee or insured engaged in willful misrepresentation.
   Existing law provides that the falsity of a statement in a life or
disability insurance policy application shall not bar the right to
recovery under the policy unless the false statement was made either
with actual intent to deceive or it materially affected the
acceptance of the risk or hazard assumed by the insurer.
   This bill, with respect to health insurance, would require both of
these conditions in order for falsity of a statement in the
application to bar the right to recovery under the policy.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 1371.8 of the Health and Safety Code is amended
to read:
   1371.8.  A health care service plan that authorizes a specific
type of treatment by a provider shall not rescind or modify this
authorization after the provider renders the health care service in
good faith and pursuant to the authorization. This section shall not
be construed to expand or alter the benefits available to the
enrollee or subscriber under a plan.  "Authorizes" and
"authorization" include, but are not limited to, verification of
eligibility, authorizing a procedure, or other communication by the
plan indicating that the health care services are covered under the
plan. 
  SEC. 2.  Section 1389.3 of the Health and Safety Code is amended to
read:
   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.  A plan shall have the
burden of demonstrating to the director the willful misrepresentation
by the enrollee prior to rescinding coverage. 
  SEC. 3.  Section 796.04 of the Insurance Code is amended to read:
   796.04.  A  disability   health  insurer
that provides coverage for hospital, medical, or surgical expenses
 and a nonprofit hospital service plan  that
authorizes a specific type of treatment for services covered under a
policyholder's contract or plan by a provider shall not rescind or
modify this authorization after the provider renders the health care
service in good faith and pursuant to the authorization. This section
shall not be construed to expand or alter the benefits available or
the terms and conditions of the contract as may be agreed upon
between a policyholder, certificate holder, or trust, and the
insurer.  "Authorizes" and "authorization" include, but are not
limited to, verification of eligibility, authorizing a procedure, or
other communication by the insurer indicating that the health care
services are covered under the contract or plan. 
  SEC. 4.  Section 10380 of the Insurance Code is amended to read:
   10380.  The falsity of any statement in the application for any
policy covered by this chapter shall not bar the right to recovery
under the policy unless  such false   the 
statement was made with actual intent to deceive or unless it
materially affected either the acceptance of the risk or the hazard
assumed by the insurer.  However, the falsity of any statement in
the application for any policy of health insurance shall not bar the
right to recovery under the policy unless the false statement was
made with actual intent to deceive and it materially 
affected either the acceptance of the risk or the hazard assumed by
the insurer. 
  SEC. 5.  Section 10384 of the Insurance Code is amended to read:
   10384.  No insurer issuing or providing any policy of 
disability   health  insurance  covering
hospital, medical, or surgical expenses  shall engage in the
practice of postclaims underwriting. For purposes of this section,
"postclaims underwriting" means the rescinding, canceling, or
limiting of a policy or certificate due to the insurer's failure to
complete medical underwriting and resolve all reasonable questions
arising from written information submitted on or with an application
before issuing the policy or certificate.  An insurer shall have
the burden of demonstrating to the commissioner the willful
misrepresentation by the insured prior to rescinding coverage.