BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 514


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          Date of Hearing:  June 21, 2016 


                ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION


                                   Ed Chau, Chair


          SB  
          514 (Anderson) - As Amended January 26, 2016


          SENATE VOTE:  39-0


          SUBJECT:  California Health Benefit Exchange


          SUMMARY:  Prohibits the California Health Benefit Exchange  
          (Covered California), from disclosing personal information  
          obtained from an application for health care coverage to a  
          certified insurance agent or certified enrollment counselor  
          without the consent of the applicant.  Specifically, this bill:   



          1)Prohibits Covered California from disclosing personal  
            information obtained from an application for health care  
            coverage to a certified insurance agent or certified  
            enrollment counselor without the consent of the applicant.



          2)Clarifies that Covered California is not precluded from  
            sharing the information of current enrollees or applicants  
            with the same certified enrollment counselor or certified  
            insurance agent of record that has already provided the  
            applicant assistance with an existing application.








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          3)Defines "personal information" to mean "any information that  
            is maintained by an agency that identifies or describes an  
            individual, including, but not limited to, his or her name,  
            social security number, physical description, home address,  
            home telephone number, education, financial matters, and  
            medical or employment history. It includes statements made by,  
            or attributed to, the individual."



          4)Contains an urgency clause making this bill operative on  
            October 1, 2016. 



          5)Makes other technical or clarifying amendments. 
          EXISTING LAW:   


          1)Establishes, pursuant to the federal Patient Protection and  
            Affordable Care Act of 2010 (ACA), protections for individuals  
            with their health insurance coverage, standards for care by  
            doctors and hospitals, and an expansion of health coverage.   
            The ACA also requires every American to have health insurance  
            coverage through individual, employer-based, or government  
            policies, or pay a fine on their federal income tax filing.   
            (Public Law 111-148).


          2)Establishes, pursuant to the federal Health Insurance  
            Portability and Accountability Act of 1996 (HIPAA),  
            protections related to the privacy of individual medical  
            information.  (Public Law 104-191)


          3)Establishes Covered California in state government as a  








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            state-based marketplace where individuals and small businesses  
            can purchase qualified health plans.  (Government Code Section  
            10050) 


          4)Places, pursuant to the Information Practices Act of 1977  
            (IPA), specific requirements on state agencies in the  
            collection, use, maintenance and dissemination of information  
            relating to individuals.  The IPA permits individuals to  
            review, obtain copies, request amendments and corrections, and  
            dispute information pertaining to them in state records, with  
            some exceptions.  The IPA also provides civil remedies and  
            penalties for violations which adversely affect individuals  
            who are the subjects of state agency records.  (Civil Code  
            (CC) Section 1798, et seq.)


          5)Prohibits, under the California Confidentiality of Medical  
            Information Act (CMIA), the use or disclosure of medical  
            information for any purpose not necessary to provide health  
            care services to the patient unless the individual authorizes  
            it or is otherwise permitted by the CMIA.  (CC 56, et seq.)


          FISCAL EFFECT: According to the Senate Appropriations Committee:



          1)Potential one-time costs of about $300,000 to modify  
            information technology systems by Covered California to allow  
            applicants to indicate whether they would like assistance  
            (special fund).  The bill, as amended, does not require  
            Covered California to develop a process for allowing an  
            applicant to indicate whether personal information can be  
            shared.  If Covered California does develop such a system, it  
            would incur the costs above.

          2)Unknown potential costs to develop the systems and procedures  
            to pass along consumer information (upon consumer request) to  








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            certified insurance agents or enrollment counsellors (special  
            fund). In addition to the system changes needed to allow a  
            consumer to consent to having contact information shared with  
            insurance agents or enrollment counsellors, Covered California  
            will need to develop systems and procedures for taking the  
            appropriate information and sharing it with the appropriate  
            partners.  Covered California does not yet have a plan for how  
            that process would work, so no cost estimates are available at  
            this time. It is likely that the costs to create those "back  
            end" systems would be in the low hundreds of thousands.  As  
            noted above, those costs would only occur if Covered  
            California decided to implement a system to allow the sharing  
            of applicant information, with consumer consent.
              
          3)Potential minor costs to revise paper applications for health  
            care coverage by the Department of Health Care Services  
            (General Fund and federal funds).  The state uses a single  
            paper application for the Medi-Cal program and coverage  
            through Covered California.  In order to comply with the  
            requirements of this bill, the Department would likely need to  
            update the paper application to opt out of future contacts.   
            The costs to do so are not expected to be significant since  
            the Department regularly revises those forms.

          COMMENTS:  





           1)Purpose of this bill  .  This bill is intended to protect  
            consumers applying for health coverage through Covered  
            California from being contacted by an insurance agent or  
            certified enrollment counselor for assistance with their  
            application without their consent.  SB 514 is  
            author-sponsored.  


          2)Author's statement  .  According to the author, "the ACA has  








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            directed states to provide marketplaces, or exchanges, for  
            consumers seeking health insurance.  Covered California, the  
            health benefit exchange in California, has provided this  
            platform for individuals shopping for a plan. Unfortunately,  
            due to a security loophole in the law, shoppers on the Web  
            site have suffered a disclosure of their data to outside  
            companies without having given their permission. This bill is  
            an effort to close that loophole, so that consumers may shop  
            free from fear of losing their privacy to unknown, outside  
            entities."


           3)Past concerns about consumer privacy  .  According to a December  
            2013 Los Angeles Times article, the names and contact  
            information for tens of thousands of people who started  
            applications with Covered California, but didn't request that  
            they be contacted, were released to insurance agents  
            affiliated with four major insurance agencies that were  
            coordinating ACA enrollment efforts.  As a result, there were  
            reports of consumers who received unsolicited offers for  
            insurance products based on the information provided by  
            Covered California - a situation some consumers felt was a  
            violation of their privacy. 


            At the same time, some consumers also became the victims of  
            fraudulent websites imitating Covered California in order to  
            lure customers to purchase insurance from private insurance  
            brokers that were not necessarily in compliance with the  
            coverage standards required by the ACA.  The California  
            Attorney General's office shut down at least ten such  
            imitation sites in 2013.  However, because consumer data was  
            simultaneously being released to certified insurance agents  
            and also being procured through fraudulent websites, it was  
            difficult for the consumer to know whether or not an agent  
            contacting them was legitimate. 


            In the same Los Angeles Times article, Covered California  








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            stated that they provided certified insurance agents with the  
            names, addresses, phone numbers and email addresses of those  
            with incomplete applications in an effort to help consumers  
            complete their applications to meet the deadline to have  
            insurance in place by January 1, 2013.  According to the  
            article, "Peter Lee, executive director of Covered California,  
            acknowledged that these consumers did not ask to be contacted  
            by the state or its certified insurance agents.  But he said  
            the outreach program still complies with privacy laws and it  
            was reviewed by the exchange's legal counsel."


            As a result of the negative feedback from consumers after this  
            incident, Covered California stopped providing consumer  
            contact information to external insurance agents, and it has  
            told Committee staff that it has no plans to reinstate the  
            program.  This bill would therefore have no obvious impact on  
            Covered California's current business practices.


           4)How Covered California uses personal information.    According  
            to Covered California, consumers with incomplete applications  
            receive follow-up contacts directly from internal enrollment  
            representatives who are not insurance agents.  


            According to Covered California's privacy policy, effective  
            June 1, 2015, the personal information it collects is strictly  
            limited to that which is both relevant and necessary to  
            fulfill the functions required under the ACA and applicable  
            state law, and includes any information provided within an  
            application for health insurance.  This type of information  
            includes Social Security number, contact information,  
            demographic data, health or financial information and alien  
            status.  The policy does state that, "by submitting personal  
            information to us or by using our Sites, you agree that we may  
            collect, use and disclose any such personal information in  
            accordance with the Privacy Policy or as permitted or required  
            by law."








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            According to the policy, Covered California enrollment  
            representatives are each required to undergo a fingerprint and  
            background check and receive specialized training to ensure  
            that personal information is kept confidential. 


           5)Arguments in support  .  A coalition representing insurance  
            underwriters, agents, brokers and advisors writes that  
            "licensed health insurance agents are already mandated to  
            comply with extensive privacy laws, undergo substantial  
            education on handling of consumer information and ethics, plus  
            annual continuing education in both areas.  Agents are also  
            subject to extensive background checks?"  



          The coalition also states that they "strongly support  
            professional handling of private health information using the  
            best professional practices that meet the many confidentiality  
            requirements of federal and state law."
            6) Prior legislation  : AB 1560 (Gorell) of 2014, would have  
             prohibited Covered California from disclosing an individual's  
             personal information to third parties.  Would have required  
             Covered California to immediately notify the public of any  
             breach of the security of personal information, regardless of  
             severity and regardless of whether the information was  
             actually accessed by an unauthorized person.  AB 1560 was  
             subsequently amended to address an unrelated issue.  


             AB 1829 (Conway) of 2014 would have prohibited Covered  
             California from hiring or contracting with individuals who  
             have been convicted of certain felonies or violations if the  
             person would be facilitating enrollment or have access to  
             financial or medical information.  AB 1829 failed passage in  
             the Assembly Health Committee.









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             AB 1830 (Conway) of 2014 would have prohibited Covered  
             California from using or disclosing personal information  
             except as necessary to carry out Covered California's  
             functions under the ACA and would have created a civil  
             penalty of up to $25,000 per individual or entity, per use or  
             disclosure.  AB 1830 failed passage the Assembly Health  
             Committee


             AB 2147 (Melendez) of 2014 would have required agencies to  
             obtain an individual's prior written consent before releasing  
             the individual's personal information to an independent  
             contractor or other worker who is not an agency employee.  AB  
             2147 was held in the Assembly Appropriations Committee.


             SB 974 (Anderson) of 2014 would have required Covered  
             California to allow consumers to indicate whether they would  
             like assistance from an agent or enrollment counselor, and  
             would have prohibited Covered California from disclosing  
             personal information if applicants indicate they do not want  
             assistance.  SB 974 was held in the Assembly Appropriations  
             Committee.


             AB 1428 (Conway), Chapter 561, Statutes of 2013, clarified  
             criminal background check requirements for employees,  
             contractors, and vendors who facilitate enrollment in Covered  
             California. 


             SB 509 (DeSaulnier and Emmerson), Chapter 10, Statutes of  
             2013, required fingerprint-based background checks for all  
             Covered California employees, contractors, volunteers, or  
             vendors with access to enrollees' personal information.  


             AB 1602 (John A. Pérez), Chapter 655, Statutes of 2010, and  








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             SB 900 (Alquist), Chapter 659, Statutes of 2010, established  
             Covered California and its powers and duties.


           7)Urgency clause  .  This measure contains an urgency clause,  
            meaning that passage on the Assembly Floor will require a  
            2/3rd vote, and would go in to effect on October 1, 2016, if  
            signed into law. 


           8)Double-referral   This bill was double-referred to the Assembly  
            Health Committee where it was passed on a 15-0 vote on June  
            14, 2016.   


          REGISTERED SUPPORT / OPPOSITION:




          Support


          California Association of Health Underwriters 


          Independent Insurance Agents and Brokers of California 


          National Association of Insurance and Financial Advisors  
          California 




          Opposition


          None on file. 








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          Analysis Prepared by:Jessica Langtry & Jennie Bretschneider / P.  
          & C.P. / (916) 319-2200