Amended in Senate June 25, 2015

Amended in Senate June 10, 2015

Amended in Assembly April 28, 2015

Amended in Assembly April 13, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 1072

Introduced by Assembly Member Daly

February 27, 2015

An act to add and repeal begin delete Section end delete begin insert Sections end insert 11401.5 begin delete of end delete begin insert and 11401.6 of end insert the Insurance Code, relating to insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 1072, as amended, Daly. Insurance: firefighters’ or police officers’ benefit and relief associations.

Existing law generally provides for the regulation of insurers by the Department of Insurance pursuant to laws set forth in the Insurance Code. Existing law authorizes the Insurance Commissioner to make certain examinations, investigations, and prosecutions and, upon making a determination of the existence of certain conduct, conditions, or grounds, to issue orders reasonably necessary to correct, eliminate, or remedy the conduct, conditions, or grounds.

Existing law exempts from the requirements set forth in the Insurance Code firemen’s, policemen’s, and peace officers’ benefit and relief associations that comply with specified criteria, including, among other things, a requirement that the membership consist solely of peace officers, members of police or fire departments, and emergency medical personnel employed by fire departments, as specified. Existing law prohibits an association from operating or doing business in the state without a certificate of authority.

This bill would require every association that holds a certificate of authority and that issues long-term disability or long-term care policies or contracts, as specified, to submit to the commissioner the opinion, as specified, of a qualified actuary as to whether the reserves and related actuarial items that support the policies or contracts issued are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts, and are based on specified actuarial standards and procedures. The bill would also require an association seeking a certificate of authority to file an opinion that meets specified requirements and that establishes that it would have adequate resources to provide benefits, as specified, as required to satisfy its proposed contractual obligations. begin insert The bill would recognize that information submitted by a company pursuant to those provisions and in the possession or control of the department as confidential and privileged, exempt from disclosure pursuant to the California Public Records Act, and not subject to subpoena or discovery or admissible in evidence in a private civil action. end insert The bill would require the commissioner to notify the association of the deficiencies in the filing if the association fails to provide an opinion and supporting memoranda to the commissioner that meets the requirements of the bill, as specified. The bill would require an association that begin delete receives that notice to, commencing 30 days from the notification date, end delete begin insert self-funds all or part of the benefits to end insert include specified disclosure language in all contracts that are not regulated by the department and in certificates evidencing coverage under those contracts. The bill would also require the commissioner, if he or she determines that the laws governing these associations are inadequate to protect the interests of the members of the associations, to develop and deliver recommendations to the Assembly Committee on Insurance and the Senate Committee on Insurance regarding changes in the law that would better protect the interests of members of the associations. The provisions of the bill would remain in effect only until December 31, 2018, and as of that date would be repealed.

begin insert

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

end insert begin insert

This bill would make legislative findings to that effect.

end insert

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

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

SECTION 1.  

Section 11401.5 is added to the Insurance Code,
to read:

11401.5.  

(a) (1) Each association that holds a certificate of
authority pursuant to this chapter and that issues long-term
disability or long-term care policies or contracts shall submit to
the commissioner the opinion of a qualified actuary as to whether
the reserves and related actuarial items that support the policies
or contracts issued pursuant to this chapter, including policies and
contracts issued by entities established by these associations that
provide benefits described in this chapter, are based on assumptions
that satisfy contractual provisions, are consistent with prior reported
amounts, and are based on actuarial standards and procedures
established by the American Academy of Actuaries and the
Actuarial Standards Board. An association that holds a certificate
of authority pursuant to this chapter shall file its opinion no later
than July 1, 2016. The opinion shall have been completed no earlier
than December 31, 2013.

(2) An association is considered to have issued a long-term care
or disability policy or contract if it self-funds all or part of the
resulting obligation. An association that markets long-term policies
or contracts issued by an insurer that is admitted by the department
to offer insurance products in the state is exempt from this reporting
requirement.

(3) An association seeking a certificate of authority pursuant to
this chapter shall file an opinion, to the extent feasible, that
establishes that it would have adequate resources to provide
benefits described in this chapter as required to satisfy its proposed
contractual obligations.

(b) The opinion required by subdivision (a) shall include an
opinion with supporting memoranda consistent with the same
qualified actuary as to whether the reserves and related actuarial
items held in support of the policies and contracts, when considered
in light of the assets held by the association with respect to the
reserves and related actuarial items, including, but not limited to,
the investment earnings on the assets and the considerations
anticipated to be received and retained under the policies and
contracts, and shall make adequate provision for the association’s
obligations under the policies and contracts, including, but not
limited to, the benefits under any expenses associated with the
policies and contracts.

(c) The opinion required by subdivision (b) shall be governed
by the following provisions:

(1) It shall include a memorandum, in form and substance
consistent with actuarial standards and procedures acceptable to
the American Academy of Actuaries and the Actuarial Standards
Board, in support of the opinion.

(2) If the association fails to provide an opinion and supporting
memoranda to the commissioner that meets the requirements of
this section, the commissioner shall notify the association of the
deficiencies in the filing, and shall make a specific request that
identifies the issues that should be addressed in an amended filing.

begin delete

(3) (A) An association that receives a notification from the
commissioner pursuant to paragraph (2) shall not indicate in any
form of communication that it is operating under the auspices of,
or was established under, the authority of any provision of this
code, the commissioner, or the department, and shall, commencing
30 days from the date of the notification from the commissioner,
include the following language in all contracts that are not regulated
by the department, and in certificates evidencing coverage under
those contracts, in capital letters and in a minium of 12-point type:

“THE BENEFITS PROVIDED BY THIS CONTRACT ARE
NOT SUBJECT TO REGULATION BY THE CALIFORNIA
DEPARTMENT OF INSURANCE, AND THE CONTRACT IS
NOT GUARANTEED BY THE CALIFORNIA INSURANCE
GUARANTEE ASSOCIATION.”

(B) The requirements of this paragraph shall continue until the
association satisfies the requirements of this section.

end delete

(d) If the commissioner determines, after a review of the filings
from the associations, that the laws governing these associations
are inadequate to protect the interests of the members of the
associations, he or she begin delete shall end delete begin insert shall, on or before July 1, 2017, end insert
develop and deliver recommendations to the Assembly Committee
on Insurance and the Senate Committee on Insurance regarding
changes in the law that would better protect the interests of
members of the associations.

begin insert

(e) Documents, materials, or other information, including the
opinion with supporting memoranda, submitted pursuant to this
section that are in the possession or control of the Department of
Insurance and that are obtained by, created by, or disclosed to
the commissioner or any other person pursuant to this section, are
recognized by this state as being proprietary and to contain trade
secrets. Those documents, materials, or other information shall
be confidential by law and privileged, shall not be subject to
disclosure pursuant to the California Public Records Act (Chapter
3.5 (commencing with Section 6250) of Division 7 of Title 1 of the
Government Code), and shall not be subject to subpoena or
discovery, or admissible in evidence, in a private civil action. The
commissioner shall not otherwise make those documents, materials,
or other information public without the prior written consent of
the association.

end insert begin delete

(e)

end delete

begin insert (f) end insert  This section shall remain in effect only until December 31,
2018, and as of that date is repealed, unless a later enacted statute,
that is enacted before December 31, 2018, deletes or extends that
date.

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 11401.6 is added to the end insert begin insert Insurance Code end insert begin insert , to
read: end insert

begin insert

begin insert 11401.6. end insert   

(a) An association that self-funds all or part of the
benefits provided under this chapter shall include the following
language, or other language approved by the commissioner, in all
contracts that are not regulated by the department, and in
certificates evidencing coverage under those contracts, in capital
letters and in a minium of 12-point type:

“ALL OR A PORTION OF THE BENEFITS PROVIDED BY
THIS CONTRACT ARE NOT SUBJECT TO REGULATION BY
THE CALIFORNIA DEPARTMENT OF INSURANCE, AND THE
CONTRACT IS NOT GUARANTEED BY THE CALIFORNIA LIFE
AND HEALTH INSURANCE GUARANTEE ASSOCIATION.”

(b) This section shall remain in effect only until December 31,
2018, and as of that date is repealed, unless a later enacted statute,
that is enacted before December 31, 2018, deletes or extends that
date.

end insert

begin insert

begin insert SEC. 3. end insert   

end insert begin insert

The Legislature finds and declares that Section 1 of
this act, which adds Section 11401.5 of the Insurance Code,
imposes a limitation on the public’s right of access to the meetings
of public bodies or the writings of public officials and agencies
within the meaning of Section 3 of Article I of the California
Constitution. Pursuant to that constitutional provision, the
Legislature makes the following findings to demonstrate the interest
protected by this limitation and the need for protecting that
interest:

end insert begin insert

In order to protect proprietary information, it is necessary to
enact legislation that limits the public’s right of access to insurance
holding company information that is provided pursuant to Section
11401.5 of the Insurance Code.

end insert