California Legislature—2013–14 Regular Session

Assembly Bill No. 526

Introduced by Assembly Member Melendez

(Coauthors: Assembly Members Bigelow, Beth Gaines, Grove, Harkey, Maienschein, Morrell, and Wilk)

(Coauthor: Senator Knight)

February 20, 2013

An act to amend Section 1386 of the Health and Safety Code, and to add Sections 830 and 831 to the Military and Veterans Code, relating to military service.

LEGISLATIVE COUNSEL’S DIGEST

AB 526, as introduced, Melendez. Military service: benefits.

Existing law provides certain protections for members of the National Guard ordered into active state service by the Governor or active federal service by the President of the United States for emergency purposes, and for reservists called to active duty, as specified.

This bill would, in addition, provide protections for these service members in connection with their military service with respect to the deferral of specified obligations or liabilities, including, among others, any payment of property tax or any special assessment, as provided. This bill would require a service member or the service member’s designee to deliver to a lender a letter signed under penalty of perjury requesting a deferment of financial obligation. This bill would provide that a deferral of payments shall not be a basis for affecting credit, as specified. This bill would also prohibit penalties from being imposed, interest from being charged and accumulated, and foreclosure or repossession of property on which payment has been deferred, as provided.

This bill would require any entity that was providing any type of health care coverage to a service member, as provided, to reinstate the health care coverage without waiting periods or exclusion of coverage for preexisting conditions and would make a violation of this requirement subject to enforcement under the Knox-Keene Health Care Service Plan Act of 1975, a willful violation of which is a crime. This bill would also make a related, conforming change.

This bill would expand the scope of an existing crime by requiring a service member to provide information under the penalty of perjury, thereby imposing a state-mandated local program. This bill would additionally impose a state-mandated local program by imposing new duties upon local tax officials with respect to the deferral of any payment of property tax or any special assessment.

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 reimbursement.

This bill would provide that with regard to certain mandates no reimbursement is required by this act for a specified reason.

With regard to any other mandates, this bill would provide that, if the Commission on State Mandates determines that the bill contains costs so mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

Section 1386 of the Health and Safety Code is
amended to read:

1386.  

(a) The director may, after appropriate notice and
opportunity for a hearing, by order suspend or revoke any license
issued under this chapter to a health care service plan or assess
administrative penalties if the director determines that the licensee
has committed any of the acts or omissions constituting grounds
for disciplinary action.

(b) The following acts or omissions constitute grounds for
disciplinary action by the director:

(1) The plan is operating at variance with the basic
organizational documents as filed pursuant to Section 1351 or
1352, or with its published plan, or in any manner contrary to that
described in, and reasonably inferred from, the plan as contained
in its application for licensure and annual report, or any
modification thereof, unless amendments allowing the variation
have been submitted to, and approved by, the director.

(2) The plan has issued, or permits others to use, evidence of
coverage or uses a schedule of charges for health care services that
do not comply with those published in the latest evidence of
coverage found unobjectionable by the director.

(3) The plan does not provide basic health care services to its
enrollees and subscribers as set forth in the evidence of coverage.
This subdivision shall not apply to specialized health care service
plan contracts.

(4) The plan is no longer able to meet the standards set forth in
Article 5 (commencing with Section 1367).

(5) The continued operation of the plan will constitute a
substantial risk to its subscribers and enrollees.

(6) The plan has violated or attempted to violate, or conspired
to violate, directly or indirectly, or assisted in or abetted a violation
or conspiracy to violate any provision of this chapter, any rule or
regulation adopted by the director pursuant to this chapter, or any
order issued by the director pursuant to this chapter.

(7) The plan has engaged in any conduct that constitutes fraud
or dishonest dealing or unfair competition, as defined by Section
17200 of the Business and Professions Code.

(8) The plan has permitted, or aided or abetted any violation by
an employee or contractor who is a holder of any certificate,
license, permit, registration, or exemption issued pursuant to the
Business and Professions Code or this code that would constitute
grounds for discipline against the certificate, license, permit,
registration, or exemption.

(9) The plan has aided or abetted or permitted the commission
of any illegal act.

(10) The engagement of a person as an officer, director,
employee, associate, or provider of the plan contrary to the
provisions of an order issued by the director pursuant to subdivision
(c) of this section or subdivision (d) of Section 1388.

(11) The engagement of a person as a solicitor or supervisor of
solicitation contrary to the provisions of an order issued by the
director pursuant to Section 1388.

(12) The plan, its management company, or any other affiliate
of the plan, or any controlling person, officer, director, or other
person occupying a principal management or supervisory position
in the plan, management company, or affiliate, has been convicted
of or pleaded nolo contendere to a crime, or committed any act
involving dishonesty, fraud, or deceit, which crime or act is
substantially related to the qualifications, functions, or duties of a
person engaged in business in accordance with this chapter. The
director may revoke or deny a license hereunder irrespective of a
subsequent order under the provisions of Section 1203.4 of the
Penal Code.

(13) The plan violates Section 510, 2056, or 2056.1 of the
Business and Professions Code or Section 1375.7.

(14) The plan has been subject to a final disciplinary action
taken by this state, another state, an agency of the federal
government, or another country for any act or omission that would
constitute a violation of this chapter.

(15) The plan violates the Confidentiality of Medical
Information Act (Part 2.6 (commencing with Section 56) of
Division 1 of the Civil Code).

(16) The plan violates Section 806 begin insert or 831 end insert of the Military and
Veterans Code.

(17) The plan violates Section 1262.8.

(c) (1) The director may prohibit any person from serving as
an officer, director, employee, associate, or provider of any plan
or solicitor firm, or of any management company of any plan, or
as a solicitor, if either of the following applies:

(A) The prohibition is in the public interest and the person has
committed, caused, participated in, or had knowledge of a violation
of this chapter by a plan, management company, or solicitor firm.

(B) The person was an officer, director, employee, associate,
or provider of a plan or of a management company or solicitor
firm of any plan whose license has been suspended or revoked
pursuant to this section and the person had knowledge of, or
participated in, any of the prohibited acts for which the license
was suspended or revoked.

(2) A proceeding for the issuance of an order under this
subdivision may be included with a proceeding against a plan
under this section or may constitute a separate proceeding, subject
in either case to subdivision (d).

(d) A proceeding under this section shall be subject to
appropriate notice to, and the opportunity for a hearing with regard
to, the person affected in accordance with subdivision (a) of Section
1397.

SEC. 2.  

Section 830 is added to the Military and Veterans
Code, to read:

830.  

(a) Subject to subdivision (b), in addition to any other
benefits provided by law and to the extent permitted by federal
law, any service member who is on military service may defer
payments during the period specified in subdivision (d) on any of
the following obligations:

(1) An obligation secured by a mortgage or deed of trust.

(2) A credit card as defined in Section 1747.02 of the Civil
Code.

(3) A retail installment contract as defined in Section 1802.6 of
the Civil Code.

(4) A retail installment account, installment account, or
revolving account as defined in Section 1802.7 of the Civil Code.

(5) Up to two vehicle loans.

(6) Any payment of property tax or any special assessment of
in-lieu property tax imposed on real property that is assessed on
residential property owned by the service member and used as that
service member’s primary place of residence on the date the service
member was ordered to military service.

(7) Any obligation owed to a utility company.

(b) In order for an obligation or liability of a service member
to be subject to this section, the service member or the service
member’s designee shall deliver to the lender:

(1) A letter signed by the service member, under penalty of
perjury, requesting a deferment of financial obligations.

(2) If required by a financial institution, proof that the service
member’s employer does not provide continuing income to the
service member while the service member is on military service,
including the service member’s military pay, of more than 90
percent of the service member’s monthly salary and wage income
earned before the call to military service.

(c) Upon request of the service member or the service members’s
dependent or designee and within five working days of that request,
if applicable, the employer of a service member shall furnish the
letter or other comparable evidence showing that the employer’s
compensation policy does not provide continuing income to the
service member, including the service member’s military pay, of
more than 90 percent of the service member’s monthly salary and
wage income earned before the call to military service.

(d) The deferral period on financial obligations shall be both of
the following:

(1) Ninety days prior to the date the service member was ordered
to military service.

(2) The lesser of 180 days or the period of military service plus
60 calendar days and shall apply only to those payments due
subsequent to the notice provided to a lender as provided in
subdivision (b).

(e) If a lender defers payments on a closed-end credit obligation
or an open-end credit obligation with a maturity date pursuant to
this section, the lender shall extend the term of the obligation by
the number of months the obligation was deferred.

(f) If a lender defers payments on an open-end credit obligation
pursuant to this section, the lender may restrict the availability of
additional credit with respect to that obligation during the term of
the deferral.

(g) (1) Notwithstanding subdivisions (e) and (f), any mortgage
payments delayed pursuant to this section are due and payable
upon the earlier of the following:

(A) The sale of the property or other event specified in the
documents creating the obligation permitting the lender to
accelerate the loan, other than a deferral of payments authorized
by this section.

(B) Further encumbrance of the property.

(C) The maturity of the obligation as defined under the terms
of the documents creating the obligation or, if applicable, as
extended pursuant to subdivision (e).

(2) Nothing in this subdivision relieves a service member with
a mortgage subject to an impound account for the payment of
property taxes, special assessments, mortgage insurance, and hazard
insurance from making monthly payments of an amount that is at
least sufficient to pay these amounts, unless the borrower and
lender agree to a lesser amount.

(3) Nothing in this section shall preclude a service member from
making payments toward the mortgage payments deferred prior
to the occurrence of any of the events in subdivision (a).

(h) During the period specified in subdivision (d), the service
member may defer the payment of principal and interest on the
specified obligations. No penalties shall be imposed on the
nonpayment of principal or interest during this period. No interest
shall be charged or accumulated on the principal or interest on
which the payment was delayed. No foreclosure or repossession
of property on which payment has been deferred shall take place
during this period.

(i) Subject to subdivisions (e) and (f), a stay, postponement, or
suspension under this section of the payment of any tax, fine,
penalty, insurance premium, or other civil obligation or liability
of a service member who is on military service shall not provide
the basis for affecting credit ratings, denial or revocation of credit,
or a change by the lender in the terms of an existing credit
arrangement.

(j) (1) The holder of a loan or retail installment sales contract
with respect to which the debtor has purchased prepaid credit
disability insurance shall give notice to the debtor not less than 30
days before the expiration date of the insurance that the debtor
will not be protected during the period between that expiration
date and the deferred maturity date of the loan or contract unless
the insurance is extended. The debtor may, at his or her option,
direct the holder to add the amount of the additional premium to
the unpaid balance of the loan or contract.

(2)  The holder of an open-ended loan or retail installment
account with respect to which the debtor has purchased credit
disability insurance with premiums payable monthly together with
the installment payments on the loan or the account shall give
notice to the debtor that the debtor will not be protected by the
insurance during the period specified in subdivision (d) unless the
debtor elects to continue payment of premiums during that period.
The debtor may, at his or her option, direct the holder to add the
amount of those premiums to the unpaid balance of the account.

(k) During the period specified in subdivision (d), the service
member may defer payments for leased vehicles without breach
of the lease or the foreclosure or repossession of the vehicle. If a
lender defers payments pursuant to this subdivision, the lender
shall extend the term of the lease by the number of months the
lease was deferred.

(l) In those instances where a financial obligation covered by
this section is sold, any requirement to defer payments as specified
in this section transfers to the purchaser of the obligation.

(m) For purposes of this section, both of the following
definitions shall apply:

(1) “Mortgage” means an obligation secured by a mortgage or
deed of trust, and is limited to an obligation secured by a mortgage
or deed of trust for residential property owned by the service
member and used as that service member’s primary place of
residence on the date the service member was ordered to military
service.

(2) “Vehicle” means a vehicle as defined in Section 670 of the
Vehicle Code.

SEC. 3.  

Section 831 is added to the Military and Veterans
Code, to read:

831.  

(a) Any entity that was providing any type of health care
coverage, including, but not limited to, health care service plans,
specialized health care service plans, and health insurance to a
service member at the time the service member was ordered to
military service, shall reinstate the health care coverage without
waiting periods or exclusion of coverage for preexisting conditions.

(b) Pursuant to Section 1386 of the Health and Safety Code, the
Director of the Department of Managed Health Care has the
authority to enforce this section concerning any person or entity
subject to regulation under Chapter 2.2 (commencing with Section
1340) of Division 2 of the Health and Safety Code, and may impose
any applicable penalties provided for under that chapter.

(c) Pursuant to subdivision (a) of Section 12921 of the Insurance
Code, the Insurance Commissioner has the authority to enforce
this section concerning any person or entity subject to regulation
under the Insurance Code, and may impose any applicable penalties
provided for under the Insurance Code.

(d) The enforcement and penalty provisions of the act that added
this subdivision shall apply only to service members ordered to
military service on or after January 1, 2014.

SEC. 4.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution for certain
costs that may be incurred by a local agency or school district
because, in that regard, this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.

However, if the Commission on State Mandates determines that
this act contains other costs mandated by the state, reimbursement
to local agencies and school districts for those costs shall be made
pursuant to Part 7 (commencing with Section 17500) of Division
4 of Title 2 of the Government Code.