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