BILL NUMBER: AB 730	AMENDED
	BILL TEXT

	AMENDED IN SENATE  JULY 23, 2009
	AMENDED IN ASSEMBLY  APRIL 29, 2009
	AMENDED IN ASSEMBLY  MARCH 26, 2009

INTRODUCED BY   Assembly Member De La Torre

                        FEBRUARY 26, 2009

   An act to amend Section 10400 of the Insurance Code, relating to
health insurance.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 730, as amended, De La Torre. Health insurance: unlawful
postclaims underwriting: penalties.
   Existing law provides for the regulation of health insurers by the
Department of Insurance. Existing law prohibits a health insurer
from engaging in the practice of postclaims underwriting, which is
defined to mean the rescinding, canceling, or limiting of a health
insurance policy or certificate due to the insurer's failure to
complete medical underwriting and resolve all reasonable questions
arising from written information submitted on or with an insurance
application. Existing law provides that any person willfully
violating various provisions governing disability insurance policies,
including health insurance policies, or orders of the commissioner
in that regard, shall forfeit to the state a sum not to exceed $118
for each violation.  Existing law requires these sums to be paid
to the Insurance Commissioner and transmitted to the State Treasury
for deposit in the General Fund. 
   This bill would provide that a health insurer that unlawfully
engages in the postclaims underwriting of a health insurance policy
shall be liable to the state for a civil penalty to be fixed by the
commissioner in an amount not to exceed $5,000, except that if the
insurer knew, or had reason to know, that the act of postclaims
underwriting was unlawful, the civil penalty shall be fixed by the
commissioner in an amount not to exceed $10,000 for each act or
violation.  The bill would require these penalties to be
deposited in the Major Risk Medical Insurance Fund, to be used, upon
appropriation by the Legislature, for the Major Risk Medical
Insurance Program.  The bill would make other related changes.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


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

  SECTION 1.  Section 10400 of the Insurance Code is amended to read:

   10400.  (a) Any person willfully violating any provision of this
chapter or order of the commissioner made in accordance therewith
shall be liable to the state for a civil penalty to be fixed by the
commissioner in an amount not to exceed one hundred eighteen dollars
($118) for each violation. The commissioner may also suspend or
revoke the license of an insurer or agent for any willful violation
in that regard.
   (b)  (1)    Notwithstanding subdivision (a), a
health insurer that unlawfully engages in the postclaims underwriting
of a health insurance policy, as defined in Section 10384, shall be
liable to the state for a civil penalty to be fixed by the
commissioner, in an amount not to exceed five thousand dollars
($5,000) for each act of postclaims underwriting of a policy, except
that if the insurer knew, or had reason to know, that the act of
postclaims underwriting was unlawful, the civil penalty shall be
fixed by the commissioner in an amount not to exceed ten thousand
dollars ($10,000) for each act or violation. 
   (2) Penalties collected pursuant to this subdivision shall be
deposited in the Major Risk Medical Insurance Fund created pursuant
to Section 12739 to be used, upon appropriation by the Legislature,
for the Major Risk Medical Insurance Program for the purposes
specified in Section 12739.1. 
   (c) The civil penalties and disciplinary actions provided for in
this section shall be determined at a hearing conducted in accordance
with the Administrative Procedure Act (Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code), and the commissioner shall have all the powers granted by that
act.