BILL ANALYSIS
AB 2035
Page 1
ASSEMBLY THIRD READING
AB 2035 (Coto)
As Introduced February 17, 2010
Majority vote
HEALTH 19-0
--------------------------------
|Ayes:|Monning, Adams, Ammiano, |
| |Carter, Conway, De La |
| |Torre, De Leon, Emmerson, |
| |Eng, Gaines, Hayashi, |
| |Hernandez, Jones, Bonnie |
| |Lowenthal, Nava, V. |
| |Manuel Perez, Salas, |
| |Smyth, Audra Strickland |
| | |
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SUMMARY : Requires the third party administrator (TPA) of a
self-funded dental benefit plan to include a disclosure in the
explanation of benefits (EOB) document and benefit claim forms
which provides the contact information for the federal
Department of Labor (DOL), which regulates self-funded plans, in
the event the consumer has a payment dispute with the plan.
Specifically, this bill :
1)Clarifies that this bill only applies to a TPA for a
self-funded dental benefit plan.
2)Directs the TPA of a self-funded dental benefit plan to
include the following disclosure in the EOB document and in
forms sent to claimants in response to claims for benefits:
This dental plan is self-funded and subject to
compliance with the federal Employee Retirement
Income Security Act (ERISA). As such, it is not
subject to consumer protection provisions of state
law governing health care coverage for dental care.
Any questions, appeals, or disputes arising from the
payment of a submitted claim should be directed to
the entity providing the coverage, or to the U.S.
DOL, Office of Participant Assistance (OPA).
3)Requires the TPA to provide the phone number for the nearest
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OPA field office in the disclosure.
4)Makes a legislative finding that regulating TPAs pursuant to
this bill constitutes a regulation of insurance and is saved
from preemption under ERISA.
FISCAL EFFECT : None
COMMENTS : According to the author, current law requires dental
benefit plans regulated by CDI or DMHC to provide certain
disclosures to consumers, including a notice that specifies the
contact telephone number and address of the regulator
responsible for handling consumer complaints. However, the
author points out that self-funded employer-sponsored benefit
plans are regulated by ERISA, which generally preempts state law
and instead provides its own requirements. The author maintains
that the lack of a notification requirement as to the regulatory
agency that oversees self-funded dental plans makes it difficult
for either a patient or provider to know how to pursue a
possible payment dispute. This bill is designed to regulate the
business of insurance by requiring insurance entities, such as
TPAs, to disclose to consumers in ERISA-covered plans
information regarding how to contact the federal DOL, the
regulatory agency that oversees these plans, should there be
payment disputes.
ERISA is a federal law that sets minimum standards for most
pension and group health plans voluntarily established by
employers and employee organizations. ERISA requires plans to
provide participants with important information about plan
features and funding; provides fiduciary responsibilities for
those who manage and control plan assets; requires plans to
establish a grievance and appeals process for participants to
get benefits from their plans; and, gives participants the right
to sue for benefits and breaches of fiduciary duty.
Generally, ERISA permits states to regulate the business of
insurance, including instances in which an ERISA plan contracts
with a state licensed insurer to provide health care to the
employees. ERISA generally preempts states from regulating
health benefits provided by a self-insured ERISA plan. ERISA
self-insured plans are subject to regulation and oversight by
the federal DOL. Consequently, state insurance departments have
no authority to investigate consumer complaints that involve
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self-funded ERISA plans. ERISA governs approximately 2.5
million health benefit plans sponsored by private employers
nationwide.
In self-funded plans, also known as self-insured plans, the
employer maintains enough money to cover employee medical
charges, and then hires a TPA, often an insurance company, to
administer the program. Self-funded plans are not underwritten
by either an insurance company or a health plan. Coverage is
provided for a group and is financed by the self-insured entity.
For example, a large employer or union may find it economically
advantageous to pay the cost for medical services for its
employees subject to the terms and conditions of the plan rather
than purchase either a group insurance policy or a group health
plan. When an employer self-funds the plan, it is generally not
subject to state laws and regulations so state mandated benefits
or prompt payment requirements do not apply. In circumstances
in which an insurance company acts as a TPA to process claims
for an employer self-funded plan, the insurance company is also
exempt from state laws and regulations.
The sponsor of this bill, the California Dental Association
(CDA) writes in support that ERISA-regulated plans are not
required to disclose that they are so regulated, and therefore
typically do not include a notification and contact number of
the federal agency which regulates them, thereby making it
difficult for either a patient or provider to know how to
appropriately pursue a possible payment dispute. CDA asserts
that this bill is a reasonable measure to address the lack of
adequate information provided to patients who are in self-funded
plans.
The Association of California Life and Health Insurance
Companies (ACLHIC) write in opposition that, while it
understands the need to keep the consumer informed, TPAs already
include information in employee booklets or other documents that
specifically state that the dental plan is self-funded and
explain a member's rights relative to disputed claim payments.
ACLHIC argues that EOB statements are not the appropriate venue
for the disclosures required by this bill because these
documents use a standardized format and the requirements to add
state-specific language to EOBs will result in expensive changes
to company computer systems that will raise the cost of
coverage.
AB 2035
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Analysis Prepared by : Cassie Rafanan / HEALTH / (916)
319-2097 FN: 0003800