BILL NUMBER: AB 1945 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 2, 2008
AMENDED IN ASSEMBLY MARCH 28, 2008
INTRODUCED BY Assembly Member De La Torre
FEBRUARY 13, 2008
An act to amend Section 1389.1 Sections
1389.1 and 1389.3 of the Health and Safety Code, and to amend
Section 10291.5 Sections 10291.5 and 10384
of the Insurance Code, relating to health care coverage.
LEGISLATIVE COUNSEL'S DIGEST
AB 1945, as amended, De La Torre. Health care coverage:
application forms. forms: postclaims
underwriting.
Existing law provides for licensure and regulation of health care
service plans by the Department of Managed Health Care. Existing law
provides for regulation of health insurers by the Insurance
Commissioner. A willful violation of provisions governing health care
service plans is a crime.
Existing law requires the Director of the Department of Managed
Health Care and the Insurance Commissioner to review and approve
health care service plan contracts and health insurance policies,
respectively. However, existing law also provides that this does not
authorize the director or commissioner to establish or require a
single or standard application form.
This bill would require the director and commissioner to establish
and require a single or standard application form for
individual health care service plan contracts and
individual health insurance policies, as applicable.
Because a willful violation of the standard application requirement
by a health care service plan would be a crime, this bill would
impose a state-mandated local program.
Existing law prohibits a health care service plan or health
insurer from engaging in postclaims underwriting, defined to mean the
rescinding, canceling, or limiting of a plan contract or insurance
policy due to the plan's or insurer's failure to complete medical
underwriting and resolve all reasonable questions relative to an
application for health care coverage before issuing the plan contract
or insurance policy.
This bill would additionally require a health care service plan or
health insurer to seek and obtain final approval from its regulator
prior to rescinding a plan contract or insurance policy, as
applicable. The bill would require the director and commissioner to
contract with one or more appropriately qualified independent review
organizations in this regard. The bill would also authorize each
regulator to suspend or revoke the license or certificate of a plan
or insurer in violation of this prohibition or to assess
administrative penalties.
Because a willful violation of these requirements by a health care
service plan would be a crime, this 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 1389.1 of the Health and Safety Code is amended
to read:
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 that 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) The director shall establish and require use of a single or
standard health care service plan application form for
individual health plan contracts .
SEC. 2. Section 1389.3 of the Health
and Safety Code is amended to read:
1389.3. (a) No health care service plan
shall engage in the practice of postclaims underwriting. For purposes
of this section subdivision ,
"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
subdivision shall not limit a plan's remedies upon a showing of
willful misrepresentation.
(b) (1) Notwithstanding any other provision of law, a health care
service plan shall seek and receive final approval from the director
prior to rescinding a plan contract of a subscriber or enrollee. No
later than January 1, 2010, the director, in consultation with the
Insurance Commissioner, shall contract with one or more appropriately
qualified independent review organizations to conduct the review
required by this subdivision. The director shall ensure that the
review organization, and any experts it designates to perform the
review, shall not have any material, professional, familial, or
financial affiliation with the health care service plan.
(2) The director may suspend or revoke a license issued to a
health care service plan or assess administrative penalties if the
director determines that the plan is in violation of this
subdivision.
SEC. 2. SEC. 3. Section 10291.5 of
the Insurance Code is amended to read:
10291.5. (a) The purpose of this section is to achieve both of
the following:
(1) Prevent, in respect to disability insurance, fraud, unfair
trade practices, and insurance economically unsound to the insured.
(2) Assure that the language of all insurance policies can be
readily understood and interpreted.
(b) The commissioner shall not approve any policy of disability
insurance for delivery in this state in any of the following
circumstances:
(1) If the commissioner finds that it contains any provision, or
has any label, description of its contents, title, heading, backing,
or other indication of its provisions that is unintelligible,
uncertain, ambiguous, or abstruse, or likely to mislead a person to
whom the policy is offered, delivered or issued.
(2) If it contains any provision for payment at a rate, or in an
amount (other than the product of rate times the periods for which
payments are promised) for loss caused by particular event or events
(as distinguished from character of physical injury or illness of the
insured) more than triple the lowest rate, or amount, promised in
the policy for the same loss caused by any other event or events
(loss caused by sickness, loss caused by accident, and different
degrees of disability each being considered, for the purpose of this
paragraph, a different loss); or if it contains any provision for
payment for any confining loss of time at a rate more than six times
the least rate payable for any partial loss of time or more than
twice the least rate payable for any nonconfining total loss of time;
or if it contains any provision for payment for any nonconfining
total loss of time at a rate more than three times the least rate
payable for any partial loss of time.
(3) If it contains any provision for payment for disability caused
by particular event or events (as distinguished from character of
physical injury or illness of the insured) payable for a term more
than twice the least term of payment provided by the policy for the
same degree of disability caused by any other event or events; or if
it contains any benefit for total nonconfining disability payable for
lifetime or for more than 12 months and any benefit for partial
disability, unless the benefit for partial disability is payable for
at least three months; or if it contains any benefit for total
confining disability payable for lifetime or for more than 12 months,
unless it also contains benefit for total nonconfining disability
caused by the same event or events payable for at least three months,
and, if it also contains any benefit for partial disability, unless
the benefit for partial disability is payable for at least three
months. The provisions of this paragraph shall apply separately to
accident benefits and to sickness benefits.
(4) If it contains a provision or provisions that would have the
effect, upon any termination of the policy, of reducing or ending the
liability as the insurer would have, but for the termination, for
loss of time resulting from accident occurring while the policy is in
force or for loss of time commencing while the policy is in force
and resulting from sickness contracted while the policy is in force
or for other losses resulting from accident occurring or sickness
contracted while the policy is in force, and also contains provision
or provisions reserving to the insurer the right to cancel or refuse
to renew the policy, unless it also contains other provision or
provisions the effect of which is that termination of the policy as
the result of the exercise by the insurer of any such right shall not
reduce or end the liability in respect to the hereinafter specified
losses as the insurer would have had under the policy, including its
other limitations, conditions, reductions, and restrictions, had the
policy not been so terminated.
The specified losses referred to in the preceding paragraph are:
(A) Loss of time which commences while the policy is in force and
results from sickness contracted while the policy is in force.
(B) Loss of time which commences within 20 days following and
results from accident occurring while the policy is in force.
(C) Losses which result from accident occurring or sickness
contracted while the policy is in force and arise out of the care or
treatment of illness or injury and which occur within 90 days from
the termination of the policy or during a period of continuous
compensable loss or losses which period commences prior to the end of
such 90 days.
(D) Losses other than those specified in subparagraphs (A), (B),
or (C) which result from accident occurring or sickness contracted
while the policy is in force and which losses occur within 90 days
following the accident or the contraction of the sickness.
(5) If by any caption, label, title, or description of contents
the policy states, implies, or infers without reasonable
qualification that it provides loss of time indemnity for lifetime,
or for any period of more than two years, if the loss of time
indemnity is made payable only when house confined or only under
special contingencies not applicable to other total loss of time
indemnity.
(6) If it contains any benefit for total confining disability
payable only upon condition that the confinement be of an abnormally
restricted nature unless the caption of the part containing any such
benefit is accurately descriptive of the nature of the confinement
required and unless, if the policy has a description of contents,
label, or title, at least one of them contain reference to the nature
of the confinement required.
(7) (A) If, irrespective of the premium charged therefor, any
benefit of the policy is, or the benefits of the policy as a whole
are, not sufficient to be of real economic value to the insured.
(B) In determining whether benefits are of real economic value to
the insured, the commissioner shall not differentiate between
insureds of the same or similar economic or occupational classes and
shall give due consideration to all of the following:
(i) The right of insurers to exercise sound underwriting judgment
in the selection and amounts of risks.
(ii) Amount of benefit, length of time of benefit, nature or
extent of benefit, or any combination of those factors.
(iii) The relative value in purchasing power of the benefit or
benefits.
(iv) Differences in insurance issued on an industrial or other
special basis.
(C) To be of real economic value, it shall not be necessary that
any benefit or benefits cover the full amount of any loss which might
be suffered by reason of the occurrence of any hazard or event
insured against.
(8) If it substitutes a specified indemnity upon the occurrence of
accidental death for any benefit of the policy, other than a
specified indemnity for dismemberment, which would accrue prior to
the time of that death or if it contains any provision which has the
effect, other than at the election of the insured exercisable within
not less than 20 days in the case of benefits specifically limited to
the loss by removal of one or more fingers or one or more toes or
within not less than 90 days in all other cases, of doing any of the
following:
(A) Of substituting, upon the occurrence of the loss of both
hands, both feet, one hand and one foot, the sight of both eyes or
the sight of one eye and the loss of one hand or one foot, some
specified indemnity for any or all benefits under the policy unless
the indemnity so specified is equal to or greater than the total of
the benefit or benefits for which such specified indemnity is
substituted and which, assuming in all cases that the insured would
continue to live, could possibly accrue within four years from the
date of such dismemberment under all other provisions of the policy
applicable to the particular event or events (as distinguished from
character of physical injury or illness) causing the dismemberment.
(B) Of substituting, upon the occurrence of any other
dismemberment some specified indemnity for any or all benefits under
the policy unless the indemnity so specified is equal to or greater
than one-fourth of the total of the benefit or benefits for which the
specified indemnity is substituted and which, assuming in all cases
that the insured would continue to live, could possibly accrue within
four years from the date of the dismemberment under all other
provisions of the policy applicable to the particular event or events
(as distinguished from character of physical injury or illness)
causing the dismemberment.
(C) Of substituting a specified indemnity upon the occurrence of
any dismemberment for any benefit of the policy which would accrue
prior to the time of dismemberment.
As used in this section, loss of a hand shall be severance at or
above the wrist joint, loss of a foot shall be severance at or above
the ankle joint, loss of an eye shall be the irrecoverable loss of
the entire sight thereof, loss of a finger shall mean at least one
entire phalanx thereof and loss of a toe the entire toe.
(9) If it contains provision, other than as provided in Section
10369.3, reducing any original benefit more than 50 percent on
account of age of the insured.
(10) If the insuring clause or clauses contain no reference to the
exceptions, limitations, and reductions (if any) or no specific
reference to, or brief statement of, each abnormally restrictive
exception, limitation, or reduction.
(11) If it contains benefit or benefits for loss or losses from
specified diseases only unless:
(A) All of the diseases so specified in each provision granting
the benefits fall within some general classification based upon the
following:
(i) The part or system of the human body principally subject to
all such diseases.
(ii) The similarity in nature or cause of such diseases.
(iii) In case of diseases of an unusually serious nature and
protracted course of treatment, the common characteristics of all
such diseases with respect to severity of affliction and cost of
treatment.
(B) The policy is entitled and each provision granting the
benefits is separately captioned in clearly understandable words so
as to accurately describe the classification of diseases covered and
expressly point out, when that is the case, that not all diseases of
the classification are covered.
(12) If it does not contain provision for a grace period of at
least the number of days specified below for the payment of each
premium falling due after the first premium, during which grace
period the policy shall continue in force provided, that the grace
period to be included in the policy shall be not less than seven days
for policies providing for weekly payment of premium, not less than
10 days for policies providing for monthly payment of premium and not
less than 31 days for all other policies.
(13) If it fails to conform in any respect with any law of this
state.
(c) The commissioner shall not approve any health insurance policy
unless the commissioner finds that the application conforms to both
of the following requirements:
(1) All applications for health insurance, except that which is
guaranteed issue, that include questions relating to medical
conditions, shall contain clear and unambiguous questions designed to
ascertain the health condition or history of the applicant.
(2) The application questions designed to ascertain the health
condition or history of the applicant shall be based on medical
information that is reasonable and necessary for medical underwriting
purposes. The application shall include a prominently displayed
notice that states:
"California law prohibits an HIV test from being required or used
by health insurance companies as a condition of obtaining health
insurance coverage."
(d) The commissioner shall establish and require a single or
standard health insurance application form for individual health
insurance policies .
(e) The commissioner may, from time to time as conditions warrant,
after notice and hearing, promulgate such reasonable rules and
regulations, and amendments and additions thereto, as are necessary
or convenient, to establish, in advance of the submission of
policies, the standard or standards conforming to subdivision (b), by
which he or she shall disapprove or withdraw approval of any
disability policy.
In promulgating any such rule or regulation the commissioner shall
give consideration to the criteria herein established and to the
desirability of approving for use in policies in this state uniform
provisions, nationwide or otherwise, and is hereby granted the
authority to consult with insurance authorities of any other state
and their representatives individually or by way of convention or
committee, to seek agreement upon those provisions.
Any such rule or regulation shall be promulgated in accordance
with the procedure provided in Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(f) The commissioner may withdraw approval of filing of any policy
or other document or matter required to be approved by the
commissioner, or filed with him or her, by this chapter when the
commissioner would be authorized to disapprove or refuse filing of
the same if originally submitted at the time of the action of
withdrawal.
Any such withdrawal shall be in writing and shall specify reasons.
An insurer adversely affected by any such withdrawal may, within a
period of 30 days following mailing or delivery of the writing
containing the withdrawal, by written request secure a hearing to
determine whether the withdrawal should be annulled, modified, or
confirmed. Unless, at any time, it is mutually agreed to the
contrary, a hearing shall be granted and commenced within 30 days
following filing of the request and shall proceed with reasonable
dispatch to determination. Unless the commissioner in writing in the
withdrawal, or subsequent thereto, grants an extension, any such
withdrawal shall, in the absence of any such request, be effective,
prospectively and not retroactively, on the 91st day following the
mailing or delivery of the withdrawal, and, if request for the
hearing is filed, on the 91st day following mailing or delivery of
written notice of the commissioner's determination.
(g) No proceeding under this section is subject to Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code.
(h) Except as provided in subdivision (k), any action taken by the
commissioner under this section is subject to review by the courts
of this state and proceedings on review shall be in accordance with
the Code of Civil Procedure.
Notwithstanding any other provision of law to the contrary,
petition for any such review may be filed at any time before the
effective date of the action taken by the commissioner. No action of
the commissioner shall become effective before the expiration of 20
days after written notice and a copy thereof are mailed or delivered
to the person adversely affected, and any action so submitted for
review shall not become effective for a further period of 15 days
after the filing of the petition in court. The court may stay the
effectiveness thereof for a longer period.
(i) This section shall be liberally construed to effectuate the
purpose and intentions herein stated; but shall not be construed to
grant the commissioner power to fix or regulate rates for disability
insurance or prescribe a standard form of disability policy, except
that the commissioner shall prescribe a standard supplementary
disclosure form for presentation with all disability insurance
policies, pursuant to Section 10603.
(j) This section shall be effective on and after July 1, 1950, as
to all policies thereafter submitted and on and after January 1,
1951, the commissioner may withdraw approval pursuant to subdivision
(d) of any policy thereafter issued or delivered in this state
irrespective of when its form may have been submitted or approved,
and prior to those dates the provisions of law in effect on January
1, 1949, shall apply to those policies.
(k) Any such policy issued by an insurer to an insured on a form
approved by the commissioner, and in accordance with the conditions,
if any, contained in the approval, at a time when that approval is
outstanding shall, as between the insurer and the insured, or any
person claiming under the policy, be conclusively presumed to comply
with, and conform to, this section.
SEC. 4. Section 10384 of the Insurance
Code is amended to read:
10384. (a) 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 subdivision
, "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.
(b) (1) Notwithstanding any other provision of law, an insurer
shall seek and receive final approval from the commissioner prior to
rescinding a health insurance policy or certificate of an insured. No
later than January 1, 2010, the commissioner, in consultation with
the Director of the Department of Managed Health Care, shall contract
with one or more appropriately qualified independent review
organizations to conduct the review required by this subdivision. The
commissioner shall ensure that the review organization, and any
experts it designates to perform the review, shall not have any
material, professional, familial, or financial affiliation with the
insurer.
(2) The commissioner may suspend or revoke a certificate of
authority issued to an insurer or assess administrative penalties if
the commissioner determines that the insurer is in violation of this
subdivision.
SEC. 3. SEC. 5. 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.