BILL ANALYSIS Ó
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 757
S
AUTHOR: Lieu
B
AMENDED: March 23, 2011
HEARING DATE: April 27, 2011
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REFERRAL: Judiciary
5
CONSULTANT:
7
Chan-Sawin
SUBJECT
Discrimination
SUMMARY
Provides that any health plan contract, health insurance
policy, or any other insurance policy that is issued to or
intended to cover any California resident shall be deemed
to provide coverage for registered domestic partners that
is equal to the coverage provided to a spouse. Requires
these plans and policies to comply with all
nondiscrimination requirements set forth in state law.
CHANGES TO EXISTING LAW
Existing law:
Provides for the regulation of health care service plans
(health plans) by the Department of Managed Health Care
(DMHC). Provides for the regulation of all forms of
insurance, including health insurance, by the California
Department of Insurance (CDI).
Provides that every disability insurance policy covering
hospital, medical or surgical expenses, that is advertised,
issued, or delivered to a California resident, regardless
of the location of the contract or master group
Continued---
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policyholder, is subject to all requirements in the
California Insurance Code, except those policies issued
outside California to an employer whose principal place of
business and majority of employees are outside California.
Requires group health plans, health insurers, and all other
forms of insurance that provide dependent coverage to
provide coverage for a registered domestic partner that is
equal to the coverage provided to a spouse.
Provides that any group health plan contract, health
insurance policy, or any other insurance policy, shall be
deemed to provide coverage for a registered domestic
partner that is equal to the coverage provided to a spouse.
This bill:
Provides that any health plan contract, health insurance
policy, or any other insurance policy that is issued to or
intended to cover any California resident shall be deemed
to provide coverage for registered domestic partners that
is equal to the coverage provided to a spouse.
Requires any health plan contract or any insurance policy
that is issued to or intended to cover any California
resident to comply with all nondiscrimination requirements
set forth in state law.
FISCAL IMPACT
This bill has not been analyzed by a fiscal committee.
BACKGROUND AND DISCUSSION
According to the author, California has strong laws
prohibiting discrimination in the issuance of insurance
policies in the state, including a requirement for all
California licensed and regulated insurers and health plans
to provide equal coverage to domestic partners. However,
some out-of-state insurance companies who are not licensed
and regulated by the state are attempting to evade
compliance with the California law that prohibits the sale
or issuance of discriminatory insurance policies, including
refusal to insure the domestic partners of gay and lesbian
Californians, despite the clear intent of the California
STAFF ANALYSIS OF SENATE BILL 757 (Lieu) Page
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Legislature to prohibit the sale of any such policies in
California.
The author adds that multi-state companies that do business
in California often contract with such out-of-state
insurance companies to provide coverage for their
employees. The author asserts that because some of these
out-of-state insurance companies believe there is a
loophole in state law, they may discriminate against
California employees who are in a domestic partnership by
refusing to provide equal coverage to domestic partners.
Because of this practice, California-based insurance
companies are at a disadvantage in the marketplace because
out-of-state insurers that sell discriminatory policies may
be able to offer cheaper policies by not covering domestic
partners. The author argues that SB 757 is needed to
ensure that California's nondiscrimination law applies to
the sale or issuance of any insurance policy in California,
regardless of where the insurance company is based.
Extraterritoriality
Employers located in one state often employ individuals who
reside in another state, or have employees in multiple
states. Many such employers purchase a single group health
plan or insurance policy covering all of their employees,
wherever they are located, which results in such group
plans and policies providing coverage to residents of more
than one state. In most states, the location of the
employer's headquarters dictates which state's insurance
regulations apply, not the location of the employee, as is
the case with individual insurance products. For example,
if an employer is headquartered in New York and has some
employees living in New Jersey, New York insurance
regulations will apply to the insurance coverage of those
employees who live in New Jersey. This is similar to
California law.
An exception to this rule occurs in states that choose to
exercise territorial jurisdiction; these states are known
as extraterritorial states. States with extraterritorial
laws require health insurers to provide benefits based on
the laws of the state where an employee resides, regardless
of where the employer is located.
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There are currently 12 states that exercise territorial
jurisdiction of insurance laws for health insurance
policies. They include Alaska, Arkansas, Connecticut,
Delaware, Indiana, Kansas, Mississippi, Montana, North
Carolina, Oklahoma, Utah and Washington. Any other state's
group health insurance laws do not apply in these states.
This means that a policy issued by a New York-based insurer
to a New York employer for an employee residing in
Connecticut is subject to Connecticut's insurance
regulations and the New York insurer must issue a
certificate of insurance that complies with Connecticut
insurance law.
Prior legislation
AB 2208 (Kehoe), Chapter 488, Statutes of 2004, establishes
the California Insurance Equality Act, which, among other
things, requires all types of insurance to provide equal
coverage to registered domestic partners.
AB 205 (Goldberg), Chapter 421, Statutes of 2003, provides
that registered domestic partners have the same rights,
protections, and benefits, and are subject to the same
responsibilities, obligations, and duties under law, as are
granted to and imposed upon spouses.
AB 2862 (Migden) of 2001 would have required group health
plans and insurance policies to provide coverage for
domestic partners on the same terms that they offer to
dependents. Vetoed by the Governor.
AB 25 (Migden), Chapter 893, Statutes of 2001, generally
requires group health plans and insurance policies to offer
coverage for domestic partners on the same terms that they
offer to dependents.
AB 1667 (Hoge), Chapter 6, Statutes of 1994, among other
things, clarifies that any specific provisions of the
California insurance law requiring out-of-state insurers to
comply with California law supersedes the general provision
that may limit the state authority to regulate insurance
contracts executed outside of the state.
SB 590 (Torres), Chapter 1209, Statutes of 1993, among
other things, specifies that every policy of disability
insurance covering hospital, medical or surgical expenses,
STAFF ANALYSIS OF SENATE BILL 757 (Lieu) Page
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advertised, issued, or delivered to a California resident,
regardless of the location of the contract or master group
policyholder, shall be subject to the Insurance Code,
except those policies issued outside California to an
employer whose principal place of business and majority of
employees are outside California.
AB 1100 (Brown), Chapter 1210, Statutes of 1993, among
other things, specifies that every health care service plan
contract or health insurance policy, regardless of the
location of the contract or master group policyholder,
shall be subject to California insurance laws.
Arguments in support
Equality California, the sponsor of the bill, asserts that
employees of out-of-state companies who live in California
and are in a domestic partnership are often the victims of
discrimination because their employer contracts with an
out-of-state insurer that does not provide equal benefits
to domestic partners. Because of this practice, domestic
partners and employers are often forced to switch insurers
to purchase coverage that treats spouses and domestic
partners equally. Equality California believes that SB 757
would ensure that such out-of-state insurers must abide by
the same nondiscrimination laws that California insurers
already do.
Writing in support, the California Association of Marriage
and Family Therapists (CAMFT) argues that the 2004
California Insurance Equality Act was intended to provide a
necessary and consistent standard of nondiscrimination in
insurance by ensuring that insurance companies treat
domestic partners in the same manner as spouses in the
purchase of insurance. CAMFT believes SB 757 would ensure
that out-of-state plans and insurers also adhere to the
nondiscrimination laws of California, thereby assuring
legislative intent behind the California Insurance Equality
Act.
COMMENTS
1. Double referral. This bill is double referred to the
Senate Judiciary Committee.
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2. Purpose of the bill. The author's intent is to remove
a loophole in existing law that exempts health plans and
insurance policies from state nondiscrimination laws if
they are issued outside of California by an out-of-state
health plan or insurer, that is not licensed by DMHC or
CDI, to an employer whose principle place of business and
majority of employees are located outside of California.
As currently drafted, the bill language does not achieve
this goal. The author may wish to consider replacing the
current language with the following:
Section 1367.30 is added to the Health and Safety to
code, to read:
1367.30. (a) Notwithstanding any other provision of
law, every health plan contract marketed, issued, or
delivered to a resident of this state, regardless of
the situs of the contract or master group
policyholder, shall be subject to section 1374.58.
Section 10112.5 of the Insurance Code is amended to
read:
10112.5. (a) Notwithstanding any other provision of
law, every policy or certificate of disability
insurance covering hospital, medical, or surgical
expenses marketed, issued, or delivered to a resident
of this state, regardless of the situs of the contract
or master group policyholder, shall be subject to all
provisions of this code.
(b) (1) Subdivision (a) shall not apply to a policy
of disability insurance that covers hospital, medical,
or surgical expenses and that is issued outside of
California to an employer whose principle place of
business and majority of employees are located outside
of California.
(c) (2) Nothing in subdivision (b) paragraph (1)
shall be construed to limit the applicability of any
other provision of this code to any policy of
disability insurance that covers hospital, medical, or
surgical expenses and that is issued outside of
California to an employer whose principle place of
business and majority of employees are located outside
STAFF ANALYSIS OF SENATE BILL 757 (Lieu) Page
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of California.
(b) Notwithstanding any other provision of law,
every policy or certificate of disability insurance
covering hospital, medical, or surgical expenses
marketed, issued, or delivered to a resident of this
state, regardless of the situs of the contract or
master group policyholder, shall be subject to section
10121.7.
3. No enforcement mechanism. Under current law, state
regulators may take enforcement action against plans and
insurers licensed by the state for non-compliance with
state law. It is unclear how state regulators may enforce
such provisions on out-of-state plans and insurers.
POSITIONS
Support: Equality California (sponsor)
California Association of Marriage and Family
Therapists
Oppose: None on file.
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