BILL NUMBER: AB 2 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JUNE 2, 2009
AMENDED IN ASSEMBLY APRIL 20, 2009
INTRODUCED BY Assembly Member De La Torre
DECEMBER 1, 2008
An act to add Sections 1389.9, 1389.10, 1389.11, 1389.13, 1389.14,
1389.15, 1389.16, 1389.17, 1389.18, 1389.19, 1389.20, 1389.22, and
1389.24 to, and to repeal and add Section 1389.1 of, the Health and
Safety Code, and to amend Sections 10270.95, 10291.5, and 12957 of,
and to add Sections 10384.1, 10384.12, 10384.14, 10384.16, 10384.18,
10384.2, 10384.22, 10384.24, 10384.26, 10384.28, 10384.29, 10384.3,
10384.32, and 10396 to, the Insurance Code, relating to health care
coverage.
LEGISLATIVE COUNSEL'S DIGEST
AB 2, as amended, De La Torre. Individual health care coverage.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975,
provides for the licensure and regulation of health care service
plans by the Department of Managed Health Care, and makes a willful
violation of its provisions a crime. Existing law provides for the
regulation of health insurers by the Department of Insurance.
Existing law prohibits the Director of the Department of Managed
Health Care and the Insurance Commissioner from approving a plan
contract or health insurance policy without a finding that the
application conforms to specified requirements. Existing law
prohibits the cancellation or nonrenewal of an enrollment or
subscription by a health care service plan except in specified
circumstances, including for nonpayment, fraud or deception in
the use of services or facilities, or for good cause as agreed
upon in the contract. Existing law prohibits the nonrenewal of
individual health benefit plans by a health insurer except in
specified circumstances, including for nonpayment or for fraud
or intentional misrepresentation of material fact .
This bill would require the director and the commissioner to
jointly, by regulation, establish standard information and health
history questions to be used by health care service plans and health
insurers for their individual health care coverage application forms,
as specified, and, on and after January 1, 2011, would require all
individual health care service plan and health insurance applications
to be reviewed and approved by the director or the commissioner,
respectively, before use by a health care service plan or health
insurer.
This bill would require all plans and insurers to complete medical
underwriting prior to issuing a health care service plan contract or
health insurance policy, and to meet certain requirements with
regard to medical underwriting, including a requirement that the plan
or insurer review each application for accuracy and completeness,
review specified claims information, make prescription drug database
inquiries, and identify and inquire of the applicant about any
omissions, ambiguities, or inconsistencies. The bill would prohibit a
plan or insurer from canceling or rescinding an individual health
care service plan contract or individual health insurance policy
unless specified conditions are met with regard to whether an
applicant intentionally misrepresented or intentionally omitted
material information in the plan or policy application, as specified,
and would provide for cancellation or nonrenewal for nonpayment
. The bill would also require a plan or insurer to annually
report to the department the total number of individual health care
service plan contracts or individual health insurance policies
issued, canceled, or rescinded pursuant to these provisions during
the preceding calendar year. The bill would require a health care
service plan or health insurer to provide specified notices to
subscribers and enrollees and insureds and policyholders. The bill
would, commencing January 1, 2011, establish in the Department of
Managed Health Care and the Department of Insurance an independent
review process for the review of health care service plans' and
health insurers' decisions to cancel or rescind individual health
care service plan contracts and health insurance policies. The bill
would enact related provisions.
Because this bill would impose additional requirements on health
care service plans, the willful violation of which would be a crime,
it 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
repealed.
SEC. 2. Section 1389.1 is added to the Health and Safety Code, to
read:
1389.1. (a) The director shall, by regulation, establish standard
information and health history questions that shall be used by all
health care service plans for their individual health care coverage
application forms. The director shall jointly develop the regulation
with the Insurance Commissioner. The regulation shall include a pool
of approved questions for use in health care service plan and health
insurance application forms for individual health plan contracts and
individual health insurance policies. The health care service plan
and health insurance application forms for individual health plan
contracts and health insurance policies may only contain questions
approved by the director and commissioner.
(b) The standard information and health history questions
developed by the director shall contain clear and unambiguous
information and questions designed to ascertain the health history of
the applicant and shall be based on the medical information that is
reasonable and necessary for medical underwriting purposes.
(c) The application form 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."
(d) The health history questions established under this section
shall include a limitation on how far back in time from the date of
the application the applicant was diagnosed with, or treated for, the
health condition specified in the questions.
(e) No later than six months after the adoption of the regulation
under subdivision (a), all individual health care service plan
application forms shall utilize only the pool of approved questions
and the standardized information established pursuant to that
subdivision.
(f) On and after January 1, 2011, all individual health care
service plan applications shall be reviewed and approved by the
director before they may be used by a health care service plan.
SEC. 3. Section 1389.9 is added to the Health and Safety Code, to
read:
1389.9. (a) A health care service plan shall complete medical
underwriting prior to issuing an enrollee or subscriber health care
service plan contract.
(b) "Medical underwriting" means the completion of a reasonable
investigation of the applicant's health history information, which
includes, but is not limited to, both of the following:
(1) Ensuring that the information submitted on the application
form and the material submitted with the application form are
complete and accurate.
(2) Resolving all reasonable questions arising from the
application form or materials submitted with the application form or
any information obtained by the health care service plan as part of
its verification of the accuracy and completeness of the application
form.
(c) A health care service plan shall adopt and implement written
medical underwriting policies and procedures to ensure that the
health care service plan does all of the following with respect to an
application for health care coverage:
(1) Reviews all of the following:
(A) Information on the application and any materials submitted
with the application form for accuracy and completeness.
(B) Claims information about the applicant that is within the
health care service plan's own claims information.
(C) At least one commercially available prescription drug database
for information about the applicant.
(2) Identifies and makes inquiries, including contacting the
applicant about any questions raised by omissions, ambiguities, or
inconsistencies based upon the information collected pursuant to
paragraph (1).
(d) The plan shall document all information collected during the
underwriting review process.
(e) On or before January 1, 2011, a health care service plan shall
file its medical underwriting policies and procedures with the
department pursuant to Section 1352.
SEC. 4. Section 1389.10 is added to the Health and Safety Code, to
read:
1389.10. (a) Within 10 business days of issuing a health care
service plan contract, the health care service plan shall send a copy
of the completed written application to the applicant with a copy of
the health care service plan contract issued by the health care
service plan, along with a notice that states all of the following:
(1) The applicant should review the completed application
carefully and notify the health care service plan within 30 days of
any inaccuracy in the application.
(2) Any intentional material misrepresentation or intentional
material omission in the information submitted in the application may
result in the cancellation or rescission of the plan contract.
(3) The applicant should retain a copy of the completed written
application for the applicant's records.
(b) If new information is provided by the applicant within the
30-day period permitted by subdivision (a), medical underwriting, as
defined in Section 1389.9, applies to the new information.
SEC. 5. Section 1389.11 is added to the Health and Safety Code, to
read:
1389.11. (a) Once a plan has issued an
individual health care service plan contract, the health care service
plan shall not rescind or cancel the health care service plan
contract unless all of the following apply:
(a)
(1) There was a material misrepresentation or material
omission in the information submitted by the applicant in the written
application to the health care service plan prior to the issuance of
the health care service plan contract that would have prevented the
contract from being entered into.
(b)
(2) The health care service plan completed medical
underwriting pursuant to Section 1389.9 before issuing the plan
contract.
(c)
(3) The health care service plan demonstrates that the
applicant intentionally misrepresented or intentionally omitted
material information on the application prior to the issuance of the
plan contract with the purpose of misrepresenting his or her health
history in order to obtain health care coverage.
(d)
(4) The application form was approved by the department
pursuant to Section 1389.1.
(e)
(5) The health care service plan sent a copy of the
completed written application to the applicant with a copy of the
health care service plan contract issued by the health care service
plan, along with the written notice required by Section 1389.10.
(b) Notwithstanding subdivision (a), an enrollment or subscription
may be canceled or not renewed for failure to pay the charge for
that coverage as set forth in paragraph (1) of subdivision (a) of
Section 1365.
SEC. 6. Section 1389.13 is added to the Health and Safety Code, to
read:
1389.13. (a) If a health care service plan obtains information
after issuing an individual health care service plan contract that
the subscriber or enrollee may have intentionally omitted or
intentionally misrepresented material information during the
application for coverage process, the health care service plan may
investigate the potential omissions or misrepresentations in order to
determine whether the subscriber's or enrollee's health care service
plan contract should be rescinded or canceled.
(b) (1) Upon initiating a postcontract issuance investigation for
potential rescission or cancellation of health care coverage, the
plan shall provide a written notice to the enrollee or subscriber via
regular and certified mail that it has initiated an investigation of
intentional material misrepresentation or intentional material
omission on the part of the enrollee or subscriber and that the
investigation could lead to the rescission or cancellation of the
enrollee's or subscriber's health care service plan contract. The
notice shall be provided by the health care service plan within five
days of the initiation of the investigation.
(2) The written notice required under paragraph (1) shall include
full disclosure of the allegedly intentional material omission or
misrepresentation and a clear and concise explanation of why the
information has resulted in the health care service plan's initiation
of an investigation to determine whether rescission or cancellation
is warranted. The notice shall invite the enrollee or subscriber to
provide any evidence or information within 45 business days to negate
the plan's reasons for initiating the postissuance investigation.
(c) (1) The plan shall complete its investigation no later than 90
days from the date of the notice sent to the enrollee or subscriber
pursuant to subdivision (b).
(2) Upon completion of its postissuance investigation, the plan
shall provide written notice via regular and certified mail to the
subscriber or enrollee that it has concluded its investigation and
has made one of the following determinations:
(A) The plan has determined that the enrollee or subscriber did
not intentionally misrepresent or intentionally omit material
information during the application process and that the subscriber's
or enrollee's health care coverage will not be canceled or rescinded.
(B) The plan intends to seek approval from the director to cancel
or rescind the enrollee's or subscriber's health care service plan
contract for intentional misrepresentation or intentional omission of
material information during the application for coverage process.
(3) The written notice required under subparagraph (B) of
paragraph (2) shall do all of the following:
(A) Include full disclosure of the nature and substance of any
information that led to the plan's determination that the enrollee or
subscriber intentionally misrepresented or intentionally omitted
material information on the application form.
(B) Provide the enrollee or subscriber with information indicating
that the health plan's determination shall not become final until it
is reviewed and approved by the department's independent review
process.
(C) Provide the enrollee or subscriber with information regarding
the department's independent review process and the right of the
enrollee or subscriber to opt out of that review process within 45
days of the date upon which an independent review organization
receives a request for independent review.
(D) Provide a statement that the health care service plan's
proposed decision to cancel or rescind the health care service plan
contract shall not become effective unless the department's
independent review organization upholds the health care service plan'
s decision or unless the enrollee or subscriber has opted out of the
independent review.
SEC. 7. Section 1389.14 is added to the Health and Safety Code, to
read:
1389.14. (a) A health care service plan shall continue to
authorize and provide all medically necessary health care services
required to be covered under an enrollee's or subscriber's health
care service plan contract until the effective date of cancellation
or rescission.
(b) The effective date of the health care service plan's
cancellation or the date upon which the plan may initiate a
rescission shall be no earlier than the date that the enrollee or
subscriber receives notification via regular and certified mail that
the independent review organization has made a determination
upholding the health care service plan's decision to rescind or
cancel pursuant to Section 1389.11.
SEC. 8. Section 1389.15 is added to the Health and Safety Code, to
read:
1389.15. (a) Commencing January 1, 2011, there is hereby
established in the department the independent review process for the
review of health care service plan decisions to cancel or rescind
health care service plan contracts pursuant to Section 1389.11.
(b) All health care service plan decisions to cancel or rescind an
enrollee's or subscriber's health care service plan contract
pursuant to Section 1389.11 shall be reviewed, unless the enrollee or
subscriber opts out of the independent review process.
(c) For purposes of this article, an enrollee or subscriber may
designate an agent to act on his or her behalf.
(d) The independent review process authorized by this article is
in addition to any other procedures or remedies that may be
available.
(e) No later than January 1, 2011, in addition to the notice
required pursuant to subdivision (b) of Section 1389.13, every health
care service plan shall prominently display in every plan member
handbook or relevant informational brochure, in every plan contract,
on enrollee evidence of coverage forms, and on copies of plan
procedures for resolving grievances, information concerning the right
of an enrollee or subscriber to an automatic independent review,
unless the enrollee or subscriber opts out, in cases where the health
care service plan has decided to cancel or rescind the enrollee's or
subscriber's health care service plan contract pursuant to Section
1389.11.
(f) (1) Upon the health care service plan's receipt of notice from
the department, the plan shall provide to the independent review
organization designated by the department a copy of all of the
following documents within seven business days:
(A) A copy of all of the enrollee's or subscriber's medical
records in the possession of the plan or its contracting providers
relevant to the plan's decision to cancel or rescind the enrollee's
or subscriber's health care service plan contract.
(B) A copy of the enrollee's or subscriber's application for
coverage with the health care service plan.
(C) A copy of all information provided to the enrollee or
subscriber by the plan concerning the health care service plan's
decision to cancel or rescind the enrollee's or subscriber's health
care service plan contract and a copy of any materials the enrollee
or subscriber, the enrollee's or subscriber's agent, or the enrollee'
s or subscriber's provider submitted to the plan. The confidentiality
of any enrollee or subscriber medical information shall be
maintained pursuant to applicable state and federal laws.
(D) A copy of any other relevant documents or information used by
the plan for the following:
(i) To complete medical underwriting pursuant to Section 1389.9.
(ii) In determining that the enrollee's or subscriber's health
care service plan contract should be canceled or rescinded and any
statements by the plan explaining the reasons for the decision to
cancel or rescind the enrollee's or subscriber's health care service
plan contract.
(2) The plan shall concurrently provide a copy of documents
required by this subdivision to the enrollee or subscriber. The
department and the independent review organization shall maintain the
confidentiality of any information found by the director to be the
proprietary information of the plan.
SEC. 9. Section 1389.16 is added to the Health and Safety Code, to
read:
1389.16. (a) The department shall expeditiously review
independent review requests and immediately notify the enrollee or
subscriber, in writing, as follows:
(1) That the health care service plan has requested an independent
review that has been approved, in whole or in part, or, if not
approved, the reasons for disapproval.
(2) That the health care service plan's proposed decision to
cancel or rescind the enrollee's or subscriber's health care service
plan contract will not become effective unless the independent review
organization upholds the health care service plan's decision.
(3) That the enrollee or subscriber has 45 days from the date of
the organization's receipt of the request for an independent review
to submit any information that may be relevant to the independent
review.
(4) That an independent review does not limit the enrollee's or
subscriber's rights to pursue any other remedies available under the
law.
(b) The health care service plan shall promptly issue a
notification to the enrollee or subscriber, after submitting all of
the required material to the independent review organization, that
includes an annotated list of documents submitted and offer the
enrollee or subscriber the opportunity to request copies of those
documents from the plan.
(c) An independent review organization shall conduct the review in
accordance with Section 1389.18 and any regulations or orders of the
director adopted pursuant to that section and the Administrative
Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code).
SEC. 10. Section 1389.17 is added to the Health and Safety Code,
to read:
1389.17. (a) On or before January 1, 2011, the department shall
contract or otherwise arrange with one or more independent
organizations in the state to conduct reviews for purposes of this
article. The independent review organizations shall be not-for-profit
and shall be independent of any health care service plan doing
business in this state. The director shall establish additional
requirements, including conflict-of-interest standards, consistent
with the purposes of this article, and an organization shall be
required to meet these requirements in order to qualify for
participation in the independent review process and to assist the
department in carrying out its responsibilities. The
conflict-of-interest standards established by the director shall also
be consistent with the conflict-of-interest provisions of Section
1374.32 to the extent applicable.
(b) The department shall include in its contract or other
arrangements with an independent review organization the following
requirements, with which the independent review organization shall
comply:
(1) Provide the department with a description of the system the
independent review organization uses to identify and recruit
arbitrators and expert consultants to review health care service plan
decisions to cancel or rescind health care service plan contracts
and the number of arbitrators and expert consultants.
(2) A description of how the independent review organization
ensures compliance with the conflict-of-interest provisions
established by the director pursuant to this section.
(3) Demonstrate that it has a quality assurance mechanism in place
that does all of the following:
(A) Ensures that the arbitrators retained are appropriately
licensed as attorneys and in good standing with the State Bar of
California.
(B) Ensures that the reviews provided by the arbitrator are
timely, clear, and credible, and that reviews are monitored for
quality on an ongoing basis.
(C) Ensures that the method of selecting an arbitrator for
individual cases achieves a fair and impartial panel of arbitrators
who are qualified to render recommendations regarding the health care
service plan's decision to cancel or rescind a health care service
plan contract.
(D) Ensures the confidentiality of medical records and the review
materials, consistent with the requirements of this section and
applicable state and federal law.
(E) Ensures the independence of the arbitrator retained to perform
the reviews and of the experts retained to provide expert opinions
through conflict-of-interest policies and prohibitions consistent
with the standards established by the director, and ensures adequate
screening for conflicts of interest.
(4) Ensures that arbitrators selected by independent review
organizations to review health care service plan decisions to cancel
or rescind a health care service plan contract meet the following
minimum requirements:
(A) Notwithstanding any other provision of law, the arbitrator
holds an unrestricted license to practice law in California.
(B) The arbitrator has no history of disciplinary action or
sanctions taken by the State Bar of California.
(C) The arbitrator does not represent health care service plans or
insurers.
(c) "Expert consultant" means an underwriter, actuary, physician
and surgeon, or other professional whose background, experience, and
knowledge are relevant to determining whether the health care service
plan completed medical underwriting or to determining the issues
raised in the review of the health care service plan's decision to
cancel or rescind the enrollee's or subscriber's health care service
plan contract.
(d) The department shall provide, upon the request of any
interested person, a copy of all nonproprietary information, as
determined by the director, filed with it by an independent review
organization seeking to contract under this article. The department
may charge a nominal fee to the interested person for photocopying
the requested information.
SEC. 11. Section 1389.18 is added to the Health and Safety Code,
to read:
1389.18. (a) (1) Upon receipt of information and documents
related to a case, the arbitrator selected to conduct the review by
the independent review organization shall promptly review all
pertinent records of the enrollee or subscriber, provider reports,
and any other information submitted to the organization as authorized
by the department or requested from any of the parties to the
dispute by the reviewers.
(2) If an arbitrator requests information from any of the parties,
a copy of the request and the response shall be provided to all of
the parties.
(3) The arbitrator may request an opinion of an expert consultant
with respect to specific questions raised in the review of whether
the health care service plan completed medical underwriting or the
health care service plan's decision to cancel or rescind an enrollee'
s or subscriber's health care service plan contract where the use of
an expert is warranted. However, the expert consultant may not render
an opinion as to whether the enrollee or subscriber intentionally
misrepresented or intentionally omitted information during the health
care service plan application process.
(b) (1) The organization shall complete its review and make its
determination in writing, and in layperson's terms to the maximum
extent practicable, within 60 days of the receipt of the application
for review and supporting documentation.
(2) The enrollee or subscriber or the enrollee's or subscriber's
agent shall have 45 days from the date of the organization's receipt
of the request for an independent review to submit any information
that may be relevant to the independent review. If the organization
does not receive any information from the enrollee or subscriber or
the enrollee's or subscriber's agent at the end of the 45 days, the
organization shall issue a written analysis and determination based
on the information it has received by that date.
(3) Subject to the approval of the department, the deadline for
the analysis and determination of the review may be extended by the
director for up to three days in extraordinary circumstances or for
good cause.
(c) The arbitrator's analysis and determination shall state the
reasons for the determination, the relevant documents in the record,
and the relevant findings supporting the determination.
(d) The independent review organization shall provide the
director, the plan, the enrollee or subscriber, and the enrollee's or
subscriber's provider with the name of the arbitrator reviewing the
case, the analysis and determination of the arbitrator, and a
description of the qualifications of the arbitrator.
(e) The director shall immediately adopt the determination of the
independent review organization and shall promptly issue a written
decision to the parties that shall be binding on the plan.
(f) After removing the names of the parties, including, but not
limited to, the enrollee or subscriber, all medical providers, the
plan, and any of the insurer's employees or contractors, director
decisions adopting a determination of an independent review
organization shall be made available by the department to the public
upon request, at the department's cost and after considering
applicable laws governing disclosure of public records,
confidentiality, and personal privacy.
SEC. 12. Section 1389.19 is added to the Health and Safety Code,
to read:
1389.19. (a) A health care service plan shall not engage in any
conduct that has the effect of prolonging the independent review
process. Engaging in that conduct or the failure of the plan to
promptly implement an independent review process decision is a
violation of this chapter and, in addition to any other fines,
penalties, and other remedies available to the director under this
chapter, the plan shall be subject to an administrative penalty of
not less than five thousand dollars ($5,000) for each day the
independent review process is prolonged or the decision is not
implemented. Administrative penalties shall be deposited in the
Managed Care Fund, and shall not be used to lower health care service
plans' assessments used to fund the department.
(b) The director shall perform an annual audit of independent
review cases for the dual purposes of education and the opportunity
to determine if any investigative or enforcement actions should be
undertaken by the department, particularly if a plan repeatedly fails
to act promptly and reasonably with respect to decisions to cancel,
rescind, limit, or deny benefits under or raise premiums on a
subscriber's or enrollee's health care service plan contract.
SEC. 13. Section 1389.20 is added to the Health and Safety Code,
to read:
1389.20. (a) After considering the results of a competitive
bidding process and any other relevant information on program costs,
the director shall establish a reasonable, per-case reimbursement
schedule to pay the costs of independent review organization reviews,
which may vary depending upon relevant factors.
(b) The costs of the independent review system for enrollees and
subscribers shall be borne by the affected health care service plans
pursuant to an assessment fee system established by the director.
Plans that do not cancel or rescind individual health care service
plan contracts pursuant to Section 1389.11 shall not be considered by
the director as "affected health care service plans" under this
section. In determining the amount to be assessed, the director shall
consider all appropriations available for the support of this
chapter and existing fees paid to the department. The director may
adjust fees upward or downward, on a schedule set by the department,
to address shortages or overpayments, and to reflect utilization of
the independent review process.
SEC. 14. Section 1389.22 is added to the Health and Safety Code,
to read:
1389.22. (a) On and after January 1, 2010, every health care
service plan shall annually report to the department the total number
of individual health
care service plan contracts issued, and the total number of
individual health care service plan contracts where the plan
initiated a cancellation or rescission or completed a cancellation or
rescission pursuant to the provisions of this article for the
preceding calendar year.
(b) On or before March 31, 2010, and annually thereafter, the
department shall publish on its Internet Web site the information
filed pursuant to this section.
SEC. 15. Section 1389.24 is added to the Health and Safety Code,
to read:
1389.24. The requirements of this article shall not apply to
health care service plan contracts for coverage issued under the
Medi-Cal program, the Access for Infants and Mothers Program, the
Healthy Families Program, or the federal Medicare Program.
SEC. 16. Section 10270.95 of the Insurance Code is amended to
read:
10270.95. Without affecting the applicability or degree of
applicability of other sections of this chapter, it is hereby
specified that the provisions of Sections 10321, 10325, 10401, of
subdivisions (a), (c), (e), (h) and (i) of Section 10320, of
subdivision (a) of Section 10290, of paragraphs (2), (3), (4), (5),
(6), (7), (8), (9), (10), (11) and (12) of subdivision (b) and
subdivisions (c), (d), (e), (f), (g), and (i) of Section 10291.5 and
of Section 10291.6, shall not apply to group disability insurance.
The provisions of Section 10401 shall not apply to family expense
disability insurance; provided, there is no discrimination between
families of the same class.
SEC. 17. 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) Ensure that the language of all insurance policies can be
readily understood and interpreted.
(b) The commissioner shall not approve any disability policy for
insurance or 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) (A) If it contains provision or provisions which 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.
(B) The specified losses referred to in subparagraph (A) are:
(i) Loss of time which commences while the policy is in force and
results from sickness contracted while the policy is in force.
(ii) Loss of time which commences within 20 days following and
results from accident occurring while the policy is in force.
(iii) 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.
(iv) Losses other than those specified in clause (i), (ii), or
(iii) of this paragraph 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 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.
(d) 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.
(e) 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.
(f) Except as provided in subdivision (h), 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.
(g) 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.
(h) 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. 18. Section 10384.1 is added to the Insurance Code, to read:
10384.1. (a) The commissioner shall, by regulation, establish
standard information and health history questions that shall be used
by all health insurers for their individual health care coverage
application forms. The commissioner shall jointly develop the
regulation with the Director of the Department of Managed Health
Care. The regulation shall include a pool of approved questions for
use in health care service plan and health insurance application
forms for individual health plan contracts and individual health
insurance policies. The health care service plan and health insurance
application forms for individual health plan contracts and health
insurance policies may only contain questions approved by the
commissioner and director.
(b) The standard information and health history questions
developed by the commissioner shall contain clear and unambiguous
information and questions designed to ascertain the health history of
the applicant and shall be based on the medical information that is
reasonable and necessary for medical underwriting purposes.
(c) The application form shall include a prominently displayed
notice that shall read:
"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 health history questions established under this section
shall include a limitation on how far back in time from the date of
the application the applicant was diagnosed with, or treated for, the
health condition specified in the questions.
(e) No later than six months after the adoption of the regulation
under subdivision (a), all individual health insurance application
forms shall utilize only the pool of approved questions and the
standardized information established pursuant to that subdivision.
(f) On and after January 1, 2011, all individual health insurance
applications shall be reviewed and approved by the commissioner
before they may be used by a health insurer.
SEC. 19. Section 10384.12 is added to the Insurance Code, to read:
10384.12. (a) A health insurer shall complete medical
underwriting prior to using a health insurance policy.
(b) "Medical underwriting" means the completion of a reasonable
investigation of the applicant's health history information, which
includes, but is not limited to, both of the following:
(1) Ensuring that the information submitted on the application
form and the material submitted with the application form are
complete and accurate.
(2) Resolving all reasonable questions arising from the
application form or materials submitted with the application form or
any information obtained by the health insurer as part of its
verification of the accuracy and completeness of the application
form.
(c) A health insurer shall adopt and implement written medical
underwriting policies and procedures to ensure that the health
insurer does all of the following with respect to an application for
health insurance:
(1) Reviews all of the following:
(A) Information on the application and any materials submitted
with the application form for accuracy and completeness.
(B) Claims information about the applicant that is within the
health insurer's own claims information.
(C) At least one commercially available prescription drug database
for information about the applicant.
(2) Identifies and makes inquiries, including contacting the
applicant about any questions raised by omissions, ambiguities, or
inconsistencies based upon the information collected pursuant to
paragraph (1).
(d) The health insurer shall document all information collected
during the underwriting review process.
(e) On or before January 1, 2011, a health insurer shall file its
medical underwriting policies and procedures with the department.
SEC. 20. Section 10384.14 is added to the Insurance Code, to read:
10384.14. (a) Within 10 business days of issuing a health
insurance policy, the health insurer shall send a copy of the
completed written application to the applicant with a copy of the
health insurance policy issued by the health insurer, along with a
notice that states all of the following:
(1) The applicant should review the completed application
carefully and notify the health insurer within 30 days of any
inaccuracy in the application.
(2) Any intentional material misrepresentation or intentional
material omission in the information submitted in the application may
result in the cancellation or rescission of the policy.
(3) The applicant should retain a copy of the completed written
application for the applicant's records.
(b) If new information is provided by the applicant within the
30-day period permitted by subdivision (a), medical underwriting, as
defined in Section 10384.12, applies to the new information.
SEC. 21. Section 10384.16 is added to the Insurance Code, to read:
10384.16. (a) Once an insurer has issued an
individual health insurance policy, the insurer shall not rescind or
cancel the policy unless all of the following apply:
(a)
(1) There was a material misrepresentation or material
omission in the information submitted by the applicant in the written
application prior to the issuance of the health insurance policy
that would have prevented the contract from being entered into.
(b)
(2) The health insurer completed medical underwriting
pursuant to Section 10384.12 before issuing the policy.
(c)
(3) The health insurer demonstrates that the applicant
intentionally misrepresented or intentionally omitted material
information on the application to the health insurer prior to the
issuance of the policy with the purpose of misrepresenting his or her
health history in order to obtain health care coverage.
(d)
(4) The application form was approved by the department
pursuant to Section 10384.1.
(e)
(5) The health insurer sent a copy of the completed
written application to the applicant with a copy of the health
insurance policy issued by the health insurer, along with the written
notice required by Section 10384.14.
(b) Notwithstanding subdivision (a), an individual policy may be
canceled or not renewed for failure to pay the charge for that
coverage as set forth in subdivision (a) of Section 10273.6.
SEC. 22. Section 10384.18 is added to the Insurance Code, to read:
10384.18. (a) If a health insurer obtains information after
issuing an individual health insurance policy that the subscriber or
enrollee may have intentionally omitted or intentionally
misrepresented material information during the application for
coverage process, the health insurer may investigate the potential
omissions or misrepresentations in order to determine whether the
insured's or policyholder's health insurance policy should be
rescinded or canceled.
(b) (1) Upon initiating a postcontract issuance investigation for
potential rescission or cancellation of health care coverage, the
insurer shall provide a written notice to the insured or policyholder
via regular and certified mail that it has initiated an
investigation of intentionally material misrepresentation or
intentionally material omission on the part of the insured or
policyholder and that the investigation could lead to the rescission
or cancellation of the insured's or policyholder's health insurance
policy. The notice shall be provided by the health insurer within
five days of the initiation of the investigation.
(2) The written notice required under paragraph (1) shall include
full disclosure of the allegedly intentional material omission or
misrepresentation and a clear and concise explanation of why the
information has resulted in the health insurer's initiation of an
investigation to determine whether rescission or cancellation is
warranted. The notice shall invite the insured or policyholder to
provide any evidence or information within 45 business days to negate
the insurer's reasons for initiating the postissuance investigation.
(c) (1) The insurer shall complete its investigation no later than
90 days from the date of the notice sent to the insured or
policyholder pursuant to subdivision (b).
(2) Upon completion of its postissuance investigation, the insurer
shall provide written notice via regular and certified mail to the
insured or policyholder that it has concluded its investigation and
has made one of the following determinations:
(A) The insurer has determined that the insured or policyholder
did not intentionally misrepresent or intentionally omit material
information during the application process and that the insured's or
policyholder's health care coverage will not be canceled or
rescinded.
(B) The insurer intends to seek approval from the commissioner to
cancel or rescind the insured's or policyholder's health insurance
policy for intentional misrepresentation or intentional omission of
material information during the application for coverage process.
(3) The written notice required under subparagraph (B) of
paragraph (2) shall do all of the following:
(A) Include full disclosure of the nature and substance of any
information that led to the insurer's determination that the insured
or policyholder intentionally misrepresented or intentionally omitted
material information on the application form.
(B) Provide the insured or policyholder with information
indicating that the health insurer's determination shall not become
final until it is reviewed and approved by the department's
independent review process.
(C) The insurer shall provide the insured or policyholder with
information regarding the department's independent review process and
the right of the insured or policyholder to opt out of that review
process within 45 days of the date upon which an independent review
organization reviews a request for an independent review.
(D)
Provide a statement that the health insurer's proposed decision to
cancel or rescind the health insurance policy shall not become
effective unless the department's independent review organization
upholds the health insurer's decision or unless the insured has opted
out of the independent review.
SEC. 23. Section 10384.2 is added to the Insurance Code, to read:
10384.2. (a) A health insurer shall continue to authorize and
provide all medically necessary health care services required to be
covered under an insured's or policyholder's health insurance policy
until the effective date of cancellation or rescission.
(b) The effective date of the health insurer's cancellation or the
date upon which the insurer may initiate a rescission shall be no
earlier than the date that the insured or policyholder receives
notification via regular and certified mail that the independent
review organization has made a determination upholding the health
insurer's decision to rescind or cancel pursuant to Section 10384.16.
SEC. 24. Section 10384.22 is added to the Insurance Code, to read:
10384.22. (a) Commencing January 1, 2011, there is hereby
established in the department the independent review process for the
review of health insurer decisions to cancel or rescind health
insurance policies pursuant to Section 10384.16.
(b) All health insurer decisions to cancel or rescind an insured's
or policyholder's health insurance policy pursuant to Section
10384.16 shall be reviewed, unless the insured opts out of the
independent review process.
(c) For purposes of this article, an insured or policyholder may
designate an agent to act on his or her behalf.
(d) The independent review process authorized by this article is
in addition to any other procedures or remedies that may be
available.
(e) No later than January 1, 2011, in addition to the notice
required pursuant to subdivision (b) of Section 10384.18, every
health insurer shall prominently display in every plan member
handbook or relevant informational brochure, in every policy, on
evidence of coverage forms, and on copies of policy procedures for
resolving grievances, information concerning the right of an insured
or policyholder to an automatic independent review, unless the
insured or policyholder opts out, in cases where the health insurer
has decided to cancel or rescind the insured's or policyholder's
health insurance policy, pursuant to Section 10384.16.
(f) (1) Upon the health insurer's receipt of notice from the
department, the insurer shall provide to the independent review
organization designated by the department a copy of all of the
following documents within seven business days:
(A) A copy of all of the insured's or policyholder's medical
records in the possession of the insurer or its contracting providers
relevant to the insurer's decision to cancel or rescind the insured'
s or policyholder's health insurance policy.
(B) A copy of the insured's or policyholder's application for
coverage with the health insurer.
(C) A copy of all information provided to the insured or
policyholder by the insurer concerning the health insurer's decision
to cancel or rescind the insured's or policyholder's health insurance
policy and a copy of any materials the insured or policyholder, the
insured's or policyholder's agent, or the insured's or policyholder's
provider submitted to the plan. The confidentiality of any insured
or policyholder medical information shall be maintained pursuant to
applicable state and federal laws.
(D) A copy of any other relevant documents or information used by
the insurer for the following:
(i) To complete medical underwriting pursuant to Section 10384.12.
(ii) In determining that the insured's or policyholder's health
insurance policy should be canceled or rescinded and any statements
by the insurer explaining the reasons for the decision to cancel or
rescind the insured's or policyholder's health insurance policy.
(2) The insurer shall concurrently provide a copy of documents
required by this subdivision to the insured or policyholder. The
department and the independent review organization shall maintain the
confidentiality of any information found by the commissioner to be
the proprietary information of the insurer.
SEC. 25. Section 10384.24 is added to the Insurance Code, to read:
10384.24. (a) The department shall expeditiously review
independent review requests and immediately notify the insured or
policyholder, in writing, as follows:
(1) That the health insurer has requested an independent review
that has been approved, in whole or in part, or, if not approved, the
reasons for disapproval.
(2) That the health insurer's proposed decision to cancel or
rescind the insured's or policyholder's health insurance policy will
not become effective unless the independent review organization
upholds the health insurer's decision.
(3) That the insured or policyholder has 45 days from the date of
the organization's receipt of the request for an independent review
to submit any information that may be relevant to the independent
review.
(4) That an independent review does not limit the insured's or
policyholder's rights to pursue any other remedies available under
the law.
(b) The health insurer shall promptly issue a notification to the
insured or policyholder, after submitting all of the required
material to the independent review organization, that includes an
annotated list of documents submitted and offer the insured or
policyholder the opportunity to request copies of those documents
from the insurer.
(c) An independent review organization shall conduct the review in
accordance with Section 10384.28 and any regulations or orders of
the commissioner adopted pursuant to that section and the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code).
SEC. 26. Section 10384.26 is added to the Insurance Code, to read:
10384.26. (a) On or before January 1, 2011, the department shall
contract or otherwise arrange with one or more independent
organizations in the state to conduct reviews for purposes of this
article. The independent review organizations shall be not-for-profit
and shall be independent of any health insurer doing business in
this state. The commissioner shall establish additional requirements,
including conflict-of-interest standards, consistent with the
purposes of this article, and an organization shall be required to
meet these requirements in order to qualify for participation in the
independent review process and to assist the department in carrying
out its responsibilities. The conflict-of-interest standards
established by the commissioner shall also be consistent with the
conflict-of-interest provisions of Section 10169.2 to the extent
applicable.
(b) The department shall include in its contract or other
arrangements with an independent review organization the following
requirements, with which the independent review organization shall
comply:
(1) Provide the department with a description of the system the
independent review organization uses to identify and recruit
arbitrators and expert consultants to review health insurer decisions
to cancel or rescind health insurance policies and the number of
arbitrators and expert consultants.
(2) A description of how the independent review organization
ensures compliance with the conflict-of-interest provisions
established by the commissioner pursuant to this section.
(3) Demonstrate that it has a quality assurance mechanism in place
that does all of the following:
(A) Ensures that the arbitrators retained are appropriately
licensed as attorneys and in good standing with the State Bar of
California.
(B) Ensures that the reviews provided by the arbitrator are
timely, clear, and credible, and that reviews are monitored for
quality on an ongoing basis.
(C) Ensures that the method of selecting an arbitrator for
individual cases achieves a fair and impartial panel of arbitrators
who are qualified to render recommendations regarding the health
insurer's decision to cancel or rescind a health insurance policy.
(D) Ensures the confidentiality of medical records and the review
materials, consistent with the requirements of this section and
applicable state and federal law.
(E) Ensures the independence of the arbitrator retained to perform
the reviews and of the experts retained to provide expert opinions
through conflict-of-interest policies and prohibitions consistent
with the standards established by the commissioner, and ensures
adequate screening for conflicts of interest.
(4) Ensures that arbitrators selected by independent review
organizations to review health insurer decisions to cancel or rescind
a health insurance policy meet the following minimum requirements:
(A) Notwithstanding any other provision of law, the arbitrator
holds an unrestricted license to practice law in California.
(B) The arbitrator has no history of disciplinary action or
sanctions taken by the State Bar of California.
(C) The arbitrator does not represent insurers or health care
service plans.
(c) "Expert consultant" means an underwriter, actuary, physician
and surgeon, or other professional whose background, experience, and
knowledge are relevant to determining whether the health insurer
completed medical underwriting or to determining the issues raised in
the review of the health insurer's decision to cancel or rescind the
insured's or policyholder's health insurance policy.
(d) The department shall provide, upon the request of any
interested person, a copy of all nonproprietary information, as
determined by the commissioner, filed with it by an independent
review organization seeking to contract under this article. The
commissioner may charge a nominal fee to the interested person for
photocopying the requested information.
SEC. 27. Section 10384.28 is added to the Insurance Code, to read:
10384.28. (a) (1) Upon receipt of information and documents
related to a case, the arbitrator selected to conduct the review by
the independent review organization shall promptly review all
pertinent records of the insured or policyholder, provider reports,
and any other information submitted to the organization as authorized
by the department or requested from any of the parties to the
dispute by the reviewers.
(2) If an arbitrator requests information from any of the parties,
a copy of the request and the response shall be provided to all of
the parties.
(3) The arbitrator may request an opinion of an expert consultant
with respect to specific questions raised in the review of whether
the health insurer completed medical underwriting or the health
insurer's decision to cancel or rescind an insured's or policyholder'
s health insurance policy where the use of an expert is warranted.
However, the expert consultant may not render an opinion as to
whether the insured or policyholder intentionally misrepresented or
intentionally omitted information during the health insurance
application process.
(b) (1) The organization shall complete its review and make its
determination in writing, and in layperson's terms to the maximum
extent practicable, within 60 days of the receipt of the application
for review and supporting documentation.
(2) The insured or policyholder or the insured's or policyholder's
agent shall have 45 days from the date of the organization's receipt
of the request for an independent review to submit any information
that may be relevant to the independent review. If the organization
does not receive any information from the insured or policyholder or
the insured's or policyholder's agent at the end of the 45 days, the
organization shall issue a written analysis and determination based
on the information it has received by that date.
(3) Subject to the approval of the department, the deadline for
the analysis and determination of the review may be extended by the
commissioner for up to three days in extraordinary circumstances or
for good cause.
(c) The arbitrator's analysis and determination shall state the
reasons for the determination, the relevant documents in the record,
and the relevant findings supporting the determination.
(d) The independent review organization shall provide the
commissioner, the insurer, the insured or policyholder, and the
insured's or policyholder's provider with the name of the arbitrator
reviewing the case, the analysis and determination of the arbitrator,
and a description of the qualifications of the arbitrator.
(e) The commissioner shall immediately adopt the determination of
the independent review organization and shall promptly issue a
written decision to the parties that shall be binding on the insurer.
(f) After removing the names of the parties, including, but not
limited to, the insured or policyholder, all medical providers, the
insurer, and any of the insurer's employees or contractors,
commissioner decisions adopting a determination of an independent
review organization shall be made available by the department to the
public upon request, at the department's cost and after considering
applicable laws governing disclosure of public records,
confidentiality, and personal privacy.
SEC. 28. Section 10384.29 is added to the Insurance Code, to read:
10384.29. (a) A health insurer shall not engage in any conduct
that has the effect of prolonging the independent review process.
Engaging in that conduct or the failure of the insurer to promptly
implement an independent review process decision is a violation of
this chapter and, in addition to any other fines, penalties, and
other remedies available to the director under this chapter, the
insurer shall be subject to an administrative penalty of not less
than five thousand dollars ($5,000) for each day the independent
review process is prolonged or the decision is not implemented.
Administrative penalties shall be deposited in the General Fund.
(b) The commissioner shall perform an annual audit of independent
review cases for the dual purposes of education and the opportunity
to determine if any investigative or enforcement actions should be
undertaken by the department, particularly if an insurer repeatedly
fails to act promptly and reasonably with respect to decisions to
cancel, rescind, limit, or deny benefits under or raise premiums on
an insured's or policyholder's health insurance policy.
SEC. 29. Section 10384.3 is added to the Insurance Code, to read:
10384.3. (a) After considering the results of a competitive
bidding process and any other relevant information on program costs,
the commissioner shall establish a reasonable, per-case reimbursement
schedule to pay the costs of independent review organization
reviews, which may vary depending upon relevant factors.
(b) The costs of the independent review system for insureds and
policyholders shall be borne by the affected health insurers pursuant
to an assessment fee system established by the commissioner.
Insurers that do not cancel or rescind individual health insurance
policies pursuant to Section 10384.16 shall not be considered by the
commissioner as "affected health insurers" under this section. In
determining the amount to be assessed, the commissioner shall
consider all appropriations available for the support of this chapter
and existing fees paid to the department. The commissioner may
adjust fees upward or downward, on a schedule set by the department,
to address shortages or overpayments, and to reflect utilization of
the independent review process.
SEC. 30. Section 10384.32 is added to the Insurance Code, to read:
10384.32. (a) On and after January 1, 2010, every health insurer
shall annually report to the department the total number of
individual health insurance policies issued, and the total number of
individual health insurance policies where the insurer initiated a
cancellation or rescission or completed a cancellation or rescission
pursuant to the provisions of this article for the preceding calendar
year.
(b) On or before March 31, 2010, and annually thereafter, the
department shall publish on its Internet Web site the information
filed pursuant to this section.
SEC. 31. Section 10396 is added to the Insurance Code, to read:
10396. The requirements of Sections 10384.1, 10384.12, 10384.14,
10384.16, 10384.17, 10384.18, 10384.2, 10384.22, 10394.24, 10384.26,
10384.28, 10384.29, 10384.3, and 10384.32 shall not apply to health
insurance policies for coverage issued under the Medi-Cal program,
the Access for Infants and Mothers Program, the Healthy Families
Program, or the federal Medicare Program.
SEC. 32. Section 12957 of the Insurance Code is amended to read:
12957. The commissioner shall not withdraw approval of a policy
theretofore approved by him or her except upon those grounds as, in
his or her opinion, would authorize disapproval upon original
submission thereof. Any withdrawal of approval shall be in writing
and shall specify the ground thereof. If the insurer demands a
hearing on a withdrawal, the hearing shall be granted and commenced
within 30 days of filing of a written demand therefor with the
commissioner. Unless the hearing is so commenced, the notice of
withdrawal shall become ineffective upon the 31st day from and after
the date of filing of the demand.
This section shall not apply to policies subject to the provisions
of subdivision (d) of Section 10291.5, or to policies, contracts, or
agreements that were approved under an alternative filing and
approval procedure as provided for in subdivision (f) of Section
10506.4 or subdivision (c) of Section 10507.5.
SEC. 33. 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.