BILL ANALYSIS                                                                                                                                                                                                    






                             SENATE JUDICIARY COMMITTEE
                           Senator Ellen M. Corbett, Chair
                              2009-2010 Regular Session


          AB 108
          Assemblymember Hayashi
          As Amended June 26, 2009
          Hearing Date: July 14, 2009
          Health and Safety Code; Insurance Code
          KB:jd
                    

                                        SUBJECT
                                           
                           Individual Health Care Coverage

                                      DESCRIPTION  

          This bill would prohibit health plans and health insurers, after  
          24 months from the issuance of an individual health plan  
          contract or health insurance policy, from rescinding the  
          individual coverage, and from canceling, limiting, or raising  
          premiums in a contract or policy, due to any omissions,  
          misrepresentations, or inaccuracies in the application form.   
          This bill would also provide that nothing in this bill would  
          limit a plan's remedies upon a showing of willful  
          misrepresentation.      

                                      BACKGROUND  

          The individual health insurance market, which covers about nine  
          percent of insured Californians or seven percent of non-elderly  
          Californians, is made up of individuals and families who pay for  
          their own coverage, generally because group coverage is not  
          available or they are ineligible for publicly subsidized health  
          coverage.  Persons often seek this type of coverage because they  
          are self-employed, early retirees, part-time employees, or have  
          "aged off" a parent's policy.

          In California, health plans and insurers conduct medical  
          underwriting, the process of reviewing an applicant or  
          applicants' medical history to ascertain the financial risk  
          posed by the applicant or applicants.  Each health plan has its  
          own underwriting guidelines in the individual market, which must  
          be filed with the California Department of Managed Health Care  
                                                                (more)



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          (DMHC), but are not publicly disclosed.  Health plans and health  
          insurers in the individual market may deny an applicant health  
          insurance, limit a benefit package, or charge a higher premium,  
          based on the assessed level of risk.  The plan or insurer may  
          also use a pre-existing condition provision or a waivered  
          condition provision to exclude coverage for up to 12 months,  
          subject to specified rules.  
                     
          Rescission involves a determination by the health plan or health  
          insurer that the contract between the plan or insurer and  
          enrollee, subscriber, or policyholder never existed because of a  
          misrepresentation by the enrollee, subscriber, or policyholder  
          at the time of application, and that, therefore, any health care  
          services the enrollee, subscriber, or policyholder received  
          during the entire time of the contract are the responsibility of  
          the enrollee, subscriber, or policyholder.  As a remedy,  
          rescission essentially places the parties back to their original  
          status prior to the execution of the contract, with premiums  
          refunded to the enrollee, and any health services paid for by  
          the plan owed by the enrollee.  

          Currently, different statutory provisions apply to health plans  
          under DMHC and health insurers under the California Department  
          of Insurance (CDI), related to rescission.  Both statutory  
          provisions prohibit post-claims underwriting, defined as  
          rescinding, canceling, or limiting a plan contract due to a plan  
          or 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 plan contract or policy.  For health plans regulated by  
          DMHC, existing law provides that the prohibition against  
          post-claims underwriting does not limit a plan's remedies upon a  
          showing of willful misrepresentation.  The Insurance Code does  
          not have a parallel provision regarding willful  
          misrepresentation.  A recent Court of Appeal opinion (see Hailey  
          below), issued in December 2007, interprets the post-claims  
          underwriting statute and a plan's right to rescission.

          In 2007, DMHC initiated a non-routine investigation of the five  
          largest plans regulated under the Knox-Keene Health Care Service  
          Plan Act of 1975 (Knox-Keene) related to rescissions of health  
          coverage.  The DMHC investigation found the following:


           ------------------------- 
          |   Number of Coverage    |
                                                                      



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          |       Rescissions       |
          | Five Largest Knox-Keene |
          |          Plans          |
           ------------------------- 
          |-----------+-------------|
          |2002       |882          |
          |-----------+-------------|
          |2003       |743          |
          |-----------+-------------|
          |2004       |1,436        |
          |-----------+-------------|
          |2005       |1,536        |
          |-----------+-------------|
          |2006       |302          |
           ------------------------- 
           ------------------------- 
          |Source:                  |
          |DMHC                     |
           ------------------------- 

          DMHC has taken an aggressive enforcement stance with respect to  
          rescissions, and in 2008, reached agreements with Anthem Blue  
          Cross, Blue Shield, Health Net, Kaiser, and PacifiCare requiring  
          them to pay fines ranging from $50,000 to $10 million, with  
          additional fines to be levied if corrective action plans for  
          rescission policies and practices going forward are not  
          submitted by the health plans, approved by DMHC and properly  
          implemented.  The settlements require the plans to offer health  
          care coverage to former members whose policies they rescinded or  
          canceled over the past four years, regardless of the former  
          member's health condition, and to reimburse the affected  
          consumers for out-of-pocket costs incurred after the policies  
          were rescinded.  DMHC ordered the plans to use a fair outside  
          arbiter selected by the DMHC to review every rescission  
          uncovered in the investigations and determine remedies, such as  
          payment of medical care and premiums.  Reimbursement for health  
          care services will be limited to those who are found by the  
          arbiter to have been wrongly rescinded.  According to DMHC, by  
          the end of February 2009, of the 3,300 enrollees who were  
          identified as having coverage rescinded and required to be  
          reinstated under the settlements, all had been offered coverage.  
            Of those offered reinstatement, 170 had re-started coverage (5  
          percent) and 293 (8 percent) have requested reimbursement under  
          the terms of the settlement.   DMHC is reportedly in the process  
          of reviewing and finalizing the health plan corrective action  
          plans related to rescission policies and practices going  
                                                                      



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          forward.

          In late 2008 and early 2009, CDI reached agreements with Anthem  
          Blue Cross, Blue Shield, and Health Net related to the insurers'  
          rescission of health insurance products subject to CDI's  
          jurisdiction.  As part of the CDI settlements, insurers agreed  
          to offer coverage to consumers whose individual, family, or  
          short-term health policies were previously terminated without  
          subjecting them to medical underwriting or exclusions for  
          pre-existing conditions, and to pay any medical expenses that  
          would have been covered under the rescinded policies if those  
          costs had not already been covered by another source.  The CDI  
          agreements do not allow the insurers to use the validity of the  
          rescission as a defense to any claim for reimbursement of  
          medical expenses.  In the CDI settlements, insurers agreed to an  
          expedited independent arbitration process to resolve any  
          disputes regarding the reimbursements for medical expenses, such  
          as coverage issues or medical necessity determinations.  As part  
          of the settlements with CDI, insurers also agreed to make  
          changes to the application forms, underwriting process, agent  
          and broker training, and notification to consumers and providers  
          of an investigation regarding information in the application and  
          oversight of its claims handling.  Insurers also agreed to  
          establish an independent third-party review process for  
          rescissions going forward. 

          Under the agreements with both DMHC and CDI, rescinded patients  
          can accept new coverage without forfeiting any legal rights, but  
          they must execute a release of any and all rescission-related  
          claims against plans or insurers in order to receive  
          reimbursement for out-of-pocket medical expenses. 

          In addition to the settlements with regulators, the Los Angeles  
          City Attorney has separately sued several insurers within the  
          city's boundaries.  There have also been multiple individual and  
          class action lawsuits brought against insurers by individuals  
          and families who argue that their policies were improperly  
          rescinded or canceled. 

          This bill was approved by the Senate Committee on Health on June  
          17, 2009. 

                                CHANGES TO EXISTING LAW
           
           Existing law provides for regulation of health plans by DMHC  
          under the Knox-Keene Health Care Service Plan Act of 1975  
                                                                      



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          (Knox-Keene) and for regulation of health insurers by CDI under  
          the Insurance Code. 
           Existing law  prohibits health plans and health insurers from  
          engaging in "post-claims underwriting" defined as rescinding,  
          canceling, or limiting a plan contract due to a plan or  
          insurer's failure to complete medical underwriting and to  
          resolve all reasonable questions arising from written  
          information submitted on, or with, an application before issuing  
          the plan contract or policy. For health plans regulated by DMHC,  
          existing law provides that the prohibition against post-claims  
          underwriting does not limit a plan's remedies upon a showing of  
          willful misrepresentation.  (Health & Saf. Code Sec. 1983.3.)

           Existing law  prohibits health plans and health insurers from  
          rescinding or modifying an authorization for services after the  
          service is rendered, for any reason, including, but not limited  
          to, the plan's subsequent rescission, cancellation, or  
          modification of the enrollee or insured's contract, or the plan  
          or insurer's subsequent determination that the health plan or  
          health insurer did not make an accurate determination of the  
          enrollee or insured's eligibility.  (Health & Saf. Code Sec.  
          1371.8.)

           Existing law  requires applications for health plan contracts and  
          health insurance policies to conform to certain standards for  
          underwriting, including use of clear and unambiguous questions,  
          when health-related questions are used to ascertain an  
          applicant's health, and requires questions relating to the  
          health condition or health history of the applicant to be based  
          on medical information that is reasonable and necessary for  
          medical underwriting purposes.  (Health & Saf. Code Sec.  
          1389.1.) 

           Existing law  , establishes a two-year contestability period for  
          disability insurance, long-term care insurance, and Medicare  
          supplement policies, during which an insurer may rescind an  
          insurance policy if specified conditions are met.  (Health &  
          Saf. Code Sec. 1358.8; Ins. Code Sec. 10350.2.) 

           Existing law  provides that an enrollment in, or a subscription  
          to, a health plan contract may not be canceled or refused  
          renewal except for failure to pay the premium, fraud or  
          deception in the use of the services or facilities, or for other  
          good cause, as is agreed upon in the contract between the plan  
          and a group or the subscriber.  Existing law provides that an  
          enrollee or subscriber who alleges that an enrollment or  
                                                                      



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          subscription has been canceled or refused renewal because of the  
          enrollee's or subscriber's health status or requirements for  
          health care services, may request a review by the director, and  
          creates a process for that review.  (Health & Saf. Code Sec.  
          1365.)

           This bill  would prohibit health plans and health insurers, after  
          24 months from the issuance of an individual health plan  
          contract or health insurance policy, from rescinding the  
          individual coverage, and from canceling, limiting, or raising  
          premiums in a contract or policy, due to any omissions,  
          misrepresentations, or inaccuracies in the application form.  

           This bill  would also provide that nothing in this bill would  
          limit a plan's remedies upon a showing of willful  
          misrepresentation. 
                                        COMMENT
           
           1.Stated need for the bill

           According to the author, news reports and lawsuits have  
          identified families saddled with thousands of dollars in medical  
          debt for treatment they believed was covered.  In many cases,  
          individual health coverage was rescinded by plans on grounds  
          that the consumers submitted false information on their original  
          applications several years prior. The author points out that  
          further investigation of these cases often revealed that  
          insurers and health plans only scoured the applications,  
          searching for any omission or possible inaccuracy, after the  
          patient submitted claims for expensive, medically necessary  
          treatment.  The author argues that this bill protects consumers  
          from open-ended and unlimited exposure to losing health coverage  
          going back to issues arising from the application, while giving  
          insurers a reasonable amount of time to review and investigate  
          individual applications.  

           2.Legal standard for rescission  
           
           In 2000, Cindy Hailey applied to Blue Shield for herself, her  
          husband, Steve, and their son, even though her new employer  
          offered coverage, because the employer's plan did not include  
          the family's doctor.  Cindy completed an individual application  
          and Blue Shield issued a policy at its preferred rate in  
          December 2000.  In February 2001, Steve Hailey was hospitalized,  
          prompting Blue Shield to investigate the application.  In June  
          2001, Blue Shield rescinded their coverage based on the Haileys'  
                                                                      



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          failure to disclose medical information, and later alleged that  
          the Haileys had willfully misrepresented information about her  
          husband's medical history, which Blue Shield uncovered in an  
          investigation it initiated when Steve Hailey incurred  
          significant medical bills following a serious automobile  
          accident.  Cindy Hailey asserted that she did not realize the  
          application called for information about her dependents and  
          thought she was only being asked to provide information on her  
          own medical issues.  Without health coverage, Steve Hailey  
          experienced significant health consequences and permanent  
          disability.  The trial court granted summary judgment in favor  
          of Blue Shield and ordered the Haileys to pay back more than  
          $100,000 in medical costs to Blue Shield.  

          In Hailey v. California Physicians' Service (2007) 158  
          Cal.App.4th 452, the Court of Appeals reversed the trial court  
          holding that Health and Safety Code Section 1389.3, the  
          post-claims underwriting statute, precludes a health services  
          plan from rescinding a contract for material misrepresentation  
          or omission unless the plan can demonstrate the  
          misrepresentation or omission was willful, or it had made  
          reasonable efforts to ensure the subscriber's application was  
          accurate and complete as part of the precontract underwriting  
          process.  However, the Hailey decision failed to articulate what  
          constitutes "reasonable efforts" to ensure that an application  
          is accurate and complete as part of the pre-contract  
          underwriting process or what constitutes resolution of all  
          reasonable questions arising from written information, as the  
          statutory prohibition on post-claims underwriting requires.  
          Blue Shield appealed the decision to the California Supreme  
          Court, which refused to hear the case, effectively making the  
          interpretation of the post-claims underwriting statute in the  
          Hailey decision the applicable law relating to rescission under  
          Knox-Keene.  Thereafter the case returned to Orange County  
          Superior where, on May 28, 2009, a judge ruled that Blue Shield  
          had acted properly, after the Haileys stipulated that they had  
          lied about Steve Hailey's preexisting condition to obtain  
          coverage.

          The Hailey decision seemingly allows a health plan to rescind on  
          a standard less than willful misrepresentation, and has created  
          ambiguity as to what constitutes a legal rescission under  
          Section 1389.3.  Health plans and insurers could argue (and  
          reportedly have been) that they are allowed to rescind so long  
          as they conducted "reasonable efforts" to ensure that the  
          application was accurate and complete.  This standard is much  
                                                                      



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          lower than the "willful misrepresentation" and raises serious  
          concerns for patients.   

          The DMHC appears to have followed the "willful  
          misrepresentation" standard prior to the Hailey decision.  As  
          reported by the LA Times on January 29, 2007, Director of DMHC,  
          Cindy Ehnes' stated that the DMHC's position was that the law  
          banned retroactive rescission unless a health plan could show  
          that a policyholder intentionally lied about his health history  
          on his application for coverage.  (See Lisa Girion, "Heath plan  
          review may be intensified; the state's top HMO regulator calls  
          for outside oversight of insurers' attempts to drop  
          policyholders," Los Angeles Times, January 30, 2007.)  

          Further, the DMHC submitted an amicus curiae brief to the Court  
          of Appeals for the Hailey decision, which stated that:

            Because of the catastrophic consequences of losing health care  
            coverage, and in furtherance of the consumer protection  
            purpose of the Knox-Keene Act, the Legislature enacted  
            [Section] 1389.3 ? [which] expressly prohibits post-claims  
            underwriting and allows a health plan to rescind coverage only  
            in cases where it has met its burden of demonstrating that the  
            consumer willfully misrepresented his or her health history.
           
          3.Governor's proposal and statements on rescission
           
          In late summer 2008, Governor Schwarzenegger provided to the  
          Legislature proposed legislative language related to rescission,  
          which, among other things, required standardized application  
          questions for health plans and insurers to use, and imposed  
          requirements and standards relating to the completion of medical  
          underwriting, and standards for rescission of a health plan  
          contract or health insurance policy during the first two years  
          following the issuance of the policy.  The Governor's proposal  
          also would have prohibited plans and insurers from rescinding,  
          canceling, limiting, or raising premiums in a contract or policy  
          due to any omissions, misrepresentations, or inaccuracies in the  
          application form, whether willful or not, or for any reason,  
          after two years, and did not include an exception for fraud.  
          This proposal was never included in legislation, but was cited  
          in the Governor's veto message of AB 1945 (De La Torre), which  
          provided more expansive prohibitions, standards, and processes  
          related to rescission.  Specifically, in the veto message, the  
          Governor stated, "My proposal contained a two-year lookback  
          protection that prevented plans from rescinding or cancelling  
                                                                      



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          after two years.  This bill [AB 1945] does not contain that  
          protection."  

           4.Bill would implement a weaker standard than the Governor's  
            proposal

           As heard in the Senate Committee on Health, this bill would have  
          prohibited health plans and health insurers, after 18 months  
          from the issuance of an individual health plan contract or  
          health insurance policy, from rescinding the individual coverage  
          for any reason, and from canceling, limiting, or raising  
          premiums in a contract or policy, due to any omissions,  
          misrepresentations, or inaccuracies in the application form,  
          whether willful or not.  Recent amendments to the bill increased  
          the time frame to 24 months, and provide that nothing in the  
          bill is intended to limit a plan's remedies upon a showing of  
          willful misrepresentation.  

          As previously discussed, the Hailey decision seemingly allows  
          health plans and insurers to rescind as long as they conduct  
          "reasonable efforts" to ensure that applications are accurate  
          and complete.  This bill would prohibit health plans and  
          insurers from rescinding or canceling a plan after 24 months  
          unless there is a "willful misrepresentation."  While this is  
          arguably an improvement over the Hailey standard for individuals  
          who have coverage or insurance for more than 24 months, it is  
          much weaker than its prior version, which would have prohibited  
          rescissions after the 18 months, whether or not there was a  
          willful misrepresentation.  

          Notably, the current version of the bill is also weaker than the  
          Governor's own health care proposal which would have prohibited  
          plans and insurers from rescinding, canceling, or raising  
          premiums after two years due to omissions, misrepresentations,  
          or inaccuracies in the application form, whether or not they  
          were willful.  As mentioned in the previous comment, the  
          Governor referenced this part of his health care proposal in his  
          veto message of AB 1945, and pointed out that AB 1945 lacked the  
          this specific protection on consumers.  This bill is intended to  
          protect consumers from open-ended exposure to losing health  
          coverage, while giving insurers a reasonable amount of time to  
          conduct thorough underwriting on individuals' applications.   
          While the extension to 24 months arguably is a reasonable time  
          frame for insurers and health plans to discover and investigate  
          errors on applications, allowing rescission even after the 24  
          months due to willful misrepresentations arguably still leaves  
                                                                      



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          consumers with open-ended exposure to losing their health care  
          coverage.  Accordingly, this committee may wish to consider  
          whether this bill should be amended to remove the exception  
          allowing rescissions and cancellations upon a showing of willful  
          misrepresentation, and return to the stronger prohibition in the  
          prior version of the bill.  The following amendments would  
          achieve this goal:

           Suggested amendments  :
                                                                            
          On page 2, line 5, after the second "contract" insert "for any  
          reason"

          On page 2, line 9, after "form" insert "whether willful or not"

          On page 2, line 14, after "law" strike "This section shall not  
          limit a"

          On page 2, strike line 15

          On page 2, line 20, after the second "policy" insert "for any  
          reason"

          On page 3, line 1, after "form" insert "whether willful or not"

          On page 3, line 6, strike "This section shall not limit a  
          health"

          On page 3, strike line 7
           
           5.   Suggested clarifying amendment

           This bill was amended in the Senate Committee on Health to  
          clarify that plans and insurers must still follow applicable law  
          and standards for rescissions, cancellations, and raising  
          premiums in existing law.  The following is a suggested  
          amendment that would make these provisions more clear and  
          concise.   The substance of the language would remain the same  
          so as to ensure that plans and insurers following existing law  
          within the initial 24 month period.  

          On page 2, line 9, strike "Nothing in this"

          On page 2, strike lines 10-13 inclusive

          On page 2, line 14, strike "contrary to other applicable law"  
                                                                      



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          and insert:

          "Nothing in this section shall be construed to alter existing  
          law that otherwise applies to a health care service plan within  
          the first 24 months following the issuance of an individual  
          health care service plan contract."

          On page 3, line 1 strike "Nothing in this section"

          On page 3, strike lines 2-5 inclusive

          On page 3, line 6, strike "to other applicable law" and insert:

          "Nothing in this section shall be construed to alter existing  
          law that otherwise applies to a health insurer within the first  
          24 months following the issuance of an individual health  
          insurance policy."

          6.   Opposition  

          In opposition to the current version of the bill, Consumer  
          Attorneys of California (CAOC) write that the amendments of June  
          26 undermine the original intent of the bill by permitting an  
          exception that permits plans to rescind at any time for willful  
          misrepresentations.  CAOC states that rescissions hurt patients  
          when they are in need of health care and most vulnerable.  CAOC  
          further states that, at some point, a patient should be able to  
          take comfort in knowing that his or her coverage will not be  
          suddenly taken away. 

          In opposition to the prior version of this bill, the California  
          Association of Health Plans (CAHP) writes that this bill would  
          bar rescission after 18 months regardless of whether the  
          enrollee misrepresented, omitted, or lied about an existing  
          health condition.  CAHP states that rescission is an important  
          tool based on basic contract law that ensures that if applicants  
          misrepresent their health status at the signing of that  
          contract, then the health plan has the right to later rescind  
          coverage due to a "lack of meeting of the minds."  CAHP argues  
          that this bill will lead to fraud and abuse because potential  
          enrollees will understand that they can falsify applications for  
          coverage and, if they can avoid detection for 18 months, will  
          secure coverage for a major medical condition.  The Association  
          of California Life and Health Insurance Companies and CAHP argue  
          that while only one tenth of one percent of individual policies  
          are rescinded, because only five percent of beneficiaries  
                                                                      



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          account for more than half of health care expenditures, it takes  
          only a few people misrepresenting themselves to increase the  
          premiums for everyone.  

          Also in opposition to a prior version of this bill, the  
          California Association of Health Underwriters (CAHU) states that  
          applicants have incentives to omit information or lie on  
          applications in order to get insurance coverage.  CAHU has found  
          that applicants who want coverage will bend the truth, have  
          short periods of amnesia and omit facts, lie, or genuinely  
          cannot remember.  In these cases of misrepresentation, if the  
          information had been disclosed there would have been no contract  
          for coverage issued.  CAHU writes that since this bill would  
          remove the fraudulent provision of current law and reduce the  
          time frame that a health plan has to uncover the fraud, this  
          bill would create a moral hazard and expose those who were  
          forthcoming on their applications to higher premiums to cover  
          the costs of those who were not.


           Support  :  (to the current version of the bill) California  
          Medical Association; AIDS Healthcare Foundation; Osteopathic  
          Physicians and Surgeons of California; (to a prior version of  
          the bill) California Chiropractic Association; American  
          Federation of State, County and Municipal Employees; California  
          Alliance for Retired Americans; California Association of  
          Marriage and Family Therapists; Area Agency on Aging of Lake &  
          Mendocino Counties; California Senior Legislature; Alliance of  
          California Autism Organizations; California Communities United  
          Institute; Congress of California Seniors; Health Access (if  
          amended)
          
          Opposition  :  (to the current version of the bill) Consumer  
          Attorneys of California (unless amended); (to a prior version of  
          the bill) Association of California Life and Health Insurance  
          Companies; California Association of Health Plans; California  
          Association of Health Underwriters

                                        HISTORY
           
           Source  :  Author
           
          Related Pending Legislation  :  

          AB 2 (De La Torre) is substantially similar to AB 1945 (De La  
          Torre) of 2008 (see below), which was vetoed by Governor  
                                                                      



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          Schwarzenegger.  AB 2 would impose specific requirements and  
          standards on health plans and health insurers related to  
          application forms, medical underwriting, and notice and  
          disclosure of rights and responsibilities for individual,  
          non-group health plan contracts and health insurance policies,  
          including the establishment of an independent external review  
          process related to a health plan or health insurer's decision to  
          cancel or rescind health care coverage. The bill would also  
          require a health plan or insurer to demonstrate intentional  
          misrepresentation or intentional material omission on the  
          application in order to rescind the plan contract or health  
          policy.  This bill is pending hearing in the Senate Committee on  
          Health.

          AB 730 (De La Torre) would increase the maximum civil penalty  
          for health insurance post-claims underwriting from $118 per  
          violation to $5,000 per violation for insurers under the  
          jurisdiction of the Commissioner of the California Department of  
          Insurance (CDI) and requires the penalties and civil penalties  
          established to be determined at a hearing conducted in  
          accordance with the Administrative Procedures Act (APA).  This  
          bill is pending hearing in the Senate Committee on Health. 

           Prior Legislation  :  

          AB 1150 (Lieu, Chapter 188, Statutes of 2008) prohibits a health  
          plan or insurer from compensating any person retained, employed,  
          or contracted with, to review medical underwriting decisions  
          based on, or related to, the number of contracts, policies, or  
          certificates, or on the cost of services for a contract, policy,  
          or certificate, that the person has caused or recommended to be  
          rescinded, canceled, or limited, or the resulting cost savings  
          to the plan or insurer.  AB 1150 also prohibits a plan or  
          insurer from setting performance goals or quotas based on the  
          number of persons whose health coverage is rescinded or any  
          financial savings to the plan or insurer associated with  
          rescission of coverage. 

          AB 1945 (De La Torre, 2008) would have imposed specific  
          requirements and standards on health plans and health insurers  
          related to the application forms, medical underwriting, and  
          notice and disclosure of rights and responsibilities for  
          individual coverage, including the establishment of an  
          independent external review process related to decisions to  
          cancel or rescind an individual's health care coverage.  This  
          bill would have also required a health plan or insurer to  
                                                                      



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          demonstrate intentional misrepresentation or intentional  
          material omission on the application in order to rescind the  
          plan contract or health policy.  AB 1945 was vetoed by Governor.

          AB 2549 (Hayashi, 2008) would have prohibited health plans and  
          health insurers from rescinding a health plan contract or health  
          insurance policy after 18 months from the time the contract is  
          effective for any reason.  This bill was held in the Senate  
          Appropriations Committee.

          AB 2569 (De Leon, Chapter 604, Statutes of 2008), requires  
          health plans and health insurers to offer new coverage, or  
          continue existing coverage, for any individual whose coverage  
          was rescinded, other than the individual whose information led  
          to the rescission, within 60 days, without medical underwriting,  
          as defined.  AB 2569 also establishes a duty for agents and  
          brokers selling individual health coverage products to assist  
          applicants in providing answers to health questions accurately  
          and completely, as specified.

          ABX1 1 (Nunez, 2007) among its comprehensive health reform  
          provisions, would have prohibited health plans and insurers from  
          rescinding any individual plan contract or policy after it is  
          issued and would have prohibited plans and insurers from  
          compensating individuals employed by, or contracted with, the  
          plan or insurer, or from setting any performance goals or  
          quotas, based on the number of persons for whom coverage is  
          rescinded or the financial savings to the plan or insurer  
          associated with the rescission of coverage.  This bill failed  
          passage in the Senate Health Committee.

          AB 1324 (De La Torre, Chapter 602, Statutes of 2007) clarifies  
          and makes specific provisions of law that currently prohibit  
          health plans and health insurers, where the plan or insurer  
          authorizes a specific type of treatment by a health care  
          provider, from rescinding or modifying the authorization after  
          the provider renders the health care service in good faith and  
          pursuant to the authorization.  

          AB 1100 (Willie Brown, Chapter 1210, Statutes of 1993) enacted  
          the Health Insurance Access and Equity Act which requires  
          applications for health plan contracts or health insurance  
          policies to conform to certain standards for underwriting,  
          including clear and unambiguous questions when health-related  
          questions are used to ascertain an applicant's health, and  
          prohibits post-claims underwriting.
                                                                      



          AB 108 (Hayashi)
          Page 15 of ?




           Prior Vote  :

          Assembly Health Committee (Ayes 13, Noes 6)
          Assembly Appropriations Committee (Ayes 11, Noes 5)
          Assembly Floor (Ayes 48, Noes 29)
          Senate Health Committee (Ayes 7, Noes 3)

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