BILL NUMBER: AB 786 AMENDED
AMENDED IN SENATE AUGUST 18, 2010
AMENDED IN SENATE SEPTEMBER 4, 2009
AMENDED IN SENATE SEPTEMBER 1, 2009
AMENDED IN SENATE AUGUST 18, 2009
AMENDED IN SENATE JUNE 30, 2009
AMENDED IN ASSEMBLY JUNE 2, 2009
AMENDED IN ASSEMBLY APRIL 22, 2009
INTRODUCED BY Assembly Member Jones
(Principal coauthor: Senator Steinberg)
FEBRUARY 26, 2009
An act to add Article 12 (commencing with Section
1399.819) to Chapter 2.2 of Division 2 of the Health and Safety Code,
and to add Chapter 9.7 (commencing with Section 10903) to Part 2 of
Division 2 of the Insurance Code, relating to health care coverage.
An act to add Section 790.16 to the Insurance Code,
relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 786, as amended, Jones. Individual health care
coverage: coverage choice categories. Insurance:
Existing law prohibits any person from engaging in any trade
practice determined to be an unfair method of competition or an
unfair or deceptive act or trade practice in the business of
This bill would provide that it is an unfair and deceptive act or
practice in the business of insurance if an insurer uses a
retained-asset account, as defined, and does not take certain
actions. The bill would specify the penalty for this unfair and
deceptive act or practice.
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 the act a crime. Existing law establishes the Office of
Patient Advocate within the department to represent the interests of
plan enrollees. Existing law also provides for the regulation of
health insurers by the Department of Insurance. Existing law requires
health care service plans and health insurers that offer contracts
or policies to individuals to comply with specified requirements.
This bill would require individual health care service plan
contracts and individual health insurance policies issued, amended,
or renewed on or after January 1, 2011, to contain a maximum limit on
out-of-pocket costs for covered benefits provided by in-network
providers and for covered emergency services, as specified. The bill
would require, by July 1, 2012, the Department of Managed Health Care
and the Department of Insurance to jointly, by regulation, develop
standard definitions and terminology for benefits and cost-sharing
provisions applicable to individual contracts and policies, as
specified, and to develop a system to categorize those contracts and
policies into coverage choice categories that meet specified
requirements. The bill would require plans and insurers to submit
certain information to the departments by a specified date and would
require the Director of the Department of Managed Health Care and the
Insurance Commissioner to categorize the contracts and policies into
the appropriate coverage choice category by a specified date. The
bill would require the Office of Patient Advocate to develop and
maintain on its Internet Web site a uniform benefits matrix of those
contracts and policies arranged by coverage choice category along
with other specified information. The bill would require health care
service plans, health insurers, solicitors, solicitor firms, brokers,
and agents to make prospective enrollees or insureds aware of the
availability and contents of the benefits matrix when marketing or
selling a contract or policy in the individual market.
Because a willful violation of the bill's requirements relative to
health care service plans would be a crime, the bill would impose a
state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
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 no .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all
of the following:
(a) It is the practice of a number of insurers to place money owed
to beneficiaries, specifically benefits from policies of dead
soldiers and veterans, into retained-asset accounts (RAA) or
"checkbook" accounts without the knowledge or consent of the
(b) By using RAAs, insurers are able to keep the difference
between the interest rates they pay out and the income from investing
these funds thereby depriving the beneficiary of the investment
value of his or her money.
(c) Assets held in RAAs are not insured by the Federal Deposit
Insurance Corporation due to the fact that RAAs are not in a
traditional depository institution, which could expose a beneficiary
to the possibility of loss if the insurer holding the beneficiary's
assets becomes insolvent or is conserved.
SEC. 2. Section 790.16 is added to the
Insurance Code , to read:
790.16. (a) It is an unfair and deceptive act or practice in the
business of insurance if an insurer that uses a retained-asset
account does not do all of the following:
(1) Obtain written prior approval from the beneficiary or the
(2) Disclose that the beneficiary or claimant is not obligated to
accept the retained-asset account, and that the beneficiary may
receive the proceed in full from the insurer.
(3) Disclose that the retained-asset account is not insured by the
Federal Deposit Insurance Corporation due to the fact that the
insurer is not a traditional depository institution, which could
expose the beneficiary or claimant to the possibility of loss if the
insurer holding the assets becomes insolvent or is conserved.
(4) Pay all interest received by the insurer, less reasonable
administrative fees, if any, to the beneficiary or claimant.
(b) For the purposes of this section, "retained-asset account"
means an account set up by an insurer in favor of a beneficiary or
claimant with the benefits or claim funds owed to the beneficiary or
(c) (1) Any person who engages in any unfair and deceptive act or
practice as defined in this section is liable to the state for a
civil penalty to be fixed by the commissioner, not to exceed five
thousand dollars ($5,000) for each act, or, if the act or practice
was willful, a civil penalty not to exceed ten thousand dollars
($10,000) for each act.
(2) The penalty imposed by this section shall be imposed by and
determined by the commissioner in the same manner as provided by
Section 790.05, and may be appealed as provided therein. All
matter omitted in this version of the bill appears in the bill as
amended in the Senate, September 4, 2009. (JR11)