Senate BillNo. 1142


Introduced by Senator Monning

February 20, 2014


An act to amend Section 1872.85 of the Insurance Code, relating to health insurance.

LEGISLATIVE COUNSEL’S DIGEST

SB 1142, as introduced, Monning. Health insurance fraud: annual special purpose assessments.

Existing law provides for the regulation of disability insurers by the Insurance Commissioner. Existing law requires every admitted disability insurer or other entity liable for any loss due to health insurance fraud doing business in California to pay an annual special purpose assessment that does not exceed $0.20 per year for each insured under an individual or group insurance policy it issues in this state, in order to fund increased investigation and prosecution of fraudulent disability insurance claims. Existing law requires that 30% of those funds be distributed to the Fraud Division of the Department of Insurance for enhanced investigative efforts and that the other 70% be distributed to local district attorneys for the investigation and prosecution of disability insurance fraud cases, as specified.

This bill would instead require that the annual special purpose assessment be paid for each insured who is a California resident under an individual or group policy regardless of the situs of the contract or master group policyholder, including blanket insurance.

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

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

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SECTION 1.  

Section 1872.85 of the Insurance Code is
2amended to read:

3

1872.85.  

(a) Every admitted disability insurer or other entity
4liable for any loss due to health insurance fraud doing business in
5this state shall pay an annual special purpose assessment to be
6determined by the commissioner, but not to exceed twenty cents
7($0.20) annually for each insuredbegin insert who is a California residentend insert
8 under an individual or group insurance policybegin delete it issues in this state,end delete
9begin insert regardless of the situs of the contract or master group policyholder,
10including blanket insurance as defined in Section 10270.2,end insert
in order
11to fund increased investigation and prosecution of fraudulent
12disability insurance claims. After incidental expenses, 30 percent
13of those funds received from the assessment per insured shall be
14distributed to the Fraud Division of the Department of Insurance
15for enhanced investigative efforts, and 70 percent of the funds
16shall be distributed to local district attorneys, pursuant to
17subdivisions (b) and (c), for investigation and prosecution of
18disability insurance fraud cases. The funds receivedbegin delete underend deletebegin insert pursuant
19toend insert
this section shall be deposited into the Disability Insurance Fraud
20Account, which is hereby created in the Insurance Fund, and shall
21be expended and distributed, when appropriated by the Legislature,
22only for enhanced investigation and prosecution of disability
23insurance fraud.

24In the course of its investigation, the Fraud Division shall
25aggressively pursue all reported incidents of probable fraud and,
26in addition, shall forward to the appropriate disciplinary body the
27names of any individuals licensed under the Business and
28Professions Code who are convicted of engaging in fraudulent
29activity along with all relevant supporting evidence.

30(b) The commissioner shall distribute funds pursuant to
31subdivision (a) to district attorneys who are able to show a likely
32positive outcome that will enhance the prosecution of disability
33insurance fraud in their jurisdiction based on specific criteria
34promulgated by the commissioner. A district attorney desiring
35funds pursuant to subdivision (a) shall submit to the commissioner
36an application that includes, but is not limited to, all of the
37following:

38(1) The proposed use of the moneys and the anticipated outcome.

P3    1(2) A list of all prior cases or projects in the district attorney’s
2jurisdiction that have been funded under the provisions of this
3section, and a copy of the final accounting for each case or project.
4If a case or project is ongoing, the most recent accounting shall be
5provided.

6(3) A detailed budget for the moneys, including salaries and
7general expenses, that specifically identifies the purchase or rental
8cost of equipment or supplies.

9(c) (1) A district attorney who receives moneys pursuant to this
10section shall submit a final detailed accounting at the conclusion
11of each case or project funded. For a case or project that continues
12for longer than six months, an interim accounting shall be
13submitted every six months, or as otherwise directed by the
14commissioner.

15(2) A district attorney who receives moneys pursuant to this
16section shall submit a final report to the commissioner, which may
17be made public, as to the success of each case or project funded
18by this section. The report shall provide information and statistics
19on the number of active investigations, arrests, indictments, and
20convictions associated with a case or project. The applications for
21moneys, the distribution of moneys, and the annual report required
22by Section 1872.9 shall be public documents.

23(3) Notwithstanding any other provision of this section,
24information submitted to the commissioner pursuant to this section
25concerning criminal investigations, whether active or inactive,
26shall be confidential.

27(4) The commissioner may conduct a fiscal audit of the programs
28administered under this subdivision. The fiscal audit shall be
29conducted by an internal audit unit of the department. The cost of
30fiscal audits shall be paid from the Disability Insurance Fraud
31begin delete Fund,end deletebegin insert Account,end insert upon appropriation by the Legislature.

32(5) If the commissioner determines that a district attorney is
33unable or unwilling to investigate or prosecute a relevant disability
34insurance fraud case, the commissioner may discontinue
35distribution of moneys allocated for that matter pursuant to this
36section, and may redistribute moneys to other eligible district
37attorneys.

38(d) Activities of the Fraud Division with regard to investigating
39and prosecuting fraudulent disability insurance claims pursuant to
P4    1this section shall be included in the report required by Section
21872.9.

3(e) This section shall not apply to policies issued by a reciprocal
4or interinsurance exchange, as defined by Sections 1303 and 1350,
5or coverage provided by or through a motor club, as defined by
6Section 12142, affiliated with a reciprocal or interinsurance
7exchange, if the annual premium charged for the coverage or the
8annual cost to the insurer for providing that coverage does not
9exceed one dollar ($1) per insured.

10(f) The commissioner shall adopt regulations to implement this
11section in accordance with the rulemaking provisions of the
12Administrative Procedure Act (Chapter 3.5 (commencing with
13Section 11340) of Part 1 of Division 3 of Title 2 of the Government
14Code).



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