Amended in Assembly June 19, 2014

Senate Bill No. 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 amended, 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 begin delete insured who is a California resident end delete begin insert person in this state covered end insert under an individual or group policy regardless of the situs of the contract or master group policyholder, begin insert and regardless of whether the insured has been issued an individual certificate of coverage, and end insert including blanket insurance. begin insert The bill would also require that the data supporting the special purpose assessment not be required to be submitted more often than once each calendar year, except that responses to questions from the commissioner and clarifying information regarding the data would not be considered as additional submissions of data. The bill would authorize, for group and blanket insurance contracts, insurers to rely on information requested from and provided by the group policyholder after a reasonable effort to obtain timely and accurate information. end insert

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

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

SECTION 1.  

Section 1872.85 of the Insurance Code is
amended to read:

1872.85.  

(a) Every admitted disability insurer or other entity
liable for any loss due to health insurance fraud doing business in
this state shall pay an annual special purpose assessment to be
determined by the commissioner, but not to exceed twenty cents
($0.20) annually for each begin delete insured who is a California resident end delete
begin insert person in this state covered end insert under an individual or group insurance
policy regardless of the situs of the contract or master group
policyholder, begin insert and regardless of whether the insured has been
issued an individual certificate of coverage, and end insert including blanket
insurance as defined in Section 10270.2, in order to fund increased
investigation and prosecution of fraudulent disability insurance
claims. begin insert The data supporting the special purpose assessment shall
not be required to be submitted more often than once each calendar
year, except that responses to questions from the commissioner
and clarifying information regarding the data shall not be
considered as additional submissions of data. For group and
blanket insurance contracts, insurers may rely on information
requested from and provided by the group policyholder after a
reasonable effort to obtain timely and accurate information. end insert After
incidental expenses, 30 percent of those funds received from the
assessment per insured shall be distributed to the Fraud Division
of the Department of Insurance for enhanced investigative efforts,
and 70 percent of the funds shall be distributed to local district
attorneys, pursuant to subdivisions (b) and (c), for investigation
and prosecution of disability insurance fraud cases. The funds
received pursuant to this section shall be deposited into the
Disability Insurance Fraud Account, which is hereby created in
the Insurance Fund, and shall be expended and distributed, when
appropriated by the Legislature, only for enhanced investigation
and prosecution of disability insurance fraud.

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

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

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

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

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

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

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

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

(4) The commissioner may conduct a fiscal audit of the programs
administered under this subdivision. The fiscal audit shall be
conducted by an internal audit unit of the department. The cost of
fiscal audits shall be paid from the Disability Insurance Fraud
Account, upon appropriation by the Legislature.

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

(d) Activities of the Fraud Division with regard to investigating
and prosecuting fraudulent disability insurance claims pursuant to
this section shall be included in the report required by Section
1872.9.

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

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