BILL ANALYSIS Ó SB 514 Page 1 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. SB 514 Page 2 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 SB 514 Page 3 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 SB 514 Page 4 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 SB 514 Page 5 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 SB 514 Page 6 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." SB 514 Page 7 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. SB 514 Page 8 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 SB 514 Page 9 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. SB 514 Page 10 Analysis Prepared by:Jessica Langtry & Jennie Bretschneider / P. & C.P. / (916) 319-2200