BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015 - 2016 Regular Session
SB 585 (Leyva)
Version: April 20, 2015
Hearing Date: April 28, 2015
Fiscal: Yes
Urgency: No
NR
SUBJECT
Insurance payments: interception
DESCRIPTION
This bill would create the Insurance Payment Intercept Program
within the Department of Insurance (CDI). The bill would require
CDI to consult with the Department of Child Support Services
(DCSS) to develop a program requiring an insurer or a
self-insurer, each as defined, to notify DCSS of a claim owed to
a person owing a duty of child support. This bill would also
define the types of claims that are subject to withholding to
satisfy a child support obligation, and would impose a fine, not
to exceed $1,000, for a violation of the bill. This bill would
also provide immunity from civil liability for any person or
entity with respect to any alleged or actual damages that occur
as a result of providing, or attempting to provide, data under
the provisions of the bill.
BACKGROUND
Existing law provides that a child's parents share equal
responsibility to support the child in a manner suitable to the
child's circumstances. (Fam. Code Sec. 3900.) Child support is
generally awarded when parents do not live together with the
child, with the amount based on a number of factors, including
the time a child spends with each parent and each parent's
earnings. Child support can either be determined by agreement
of the parents or by court order. In California, the child
support program is administered by the Department of Child
Support Services (DCSS), and carried out at the county level.
Recipients of child support may receive payments by check,
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direct deposit into a bank account, or by the state's Electronic
Pay Card.
Congress passed legislation in 2006 that authorized the Federal
Office of Child Support Enforcement (OCSE) to compare
information about individuals who owe past-due support with
payee information on in-process insurance claims, settlements,
and awards. OCSE partners with the insurance industry and state
child support agencies to help states collect child support
through this voluntary program. All 50 states, the District of
Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands
participate in the Insurance Match program, although only six
states have enacted legislation which makes this program
mandatory. By creating the Insurance Payment Intercept Program
within the California Department of Insurance, and requiring all
insurers and self-insurers operating in the state to participate
in the program, this bill would make the program mandatory in
California as well.
This bill was heard by the Senate Insurance Committee on April
8, 2015, and passed out on a vote of 6-0 with the understanding
that the author would continue to address stakeholder concerns
raised before the Insurance Committee. The bill has been
subsequently amended in an effort to address those concerns.
CHANGES TO EXISTING LAW
Existing federal law creates the federal Office of Child Support
Enforcement (OCSE) within the U.S. Department of Health and
Human Services. (45 C.F.R. 301.0 et seq.)
Existing federal law authorizes the OCSE to compare information
about individuals owing past due child support with information
maintained by insurers (or their agents) related to insurance
claims, settlements, awards, and payments. (42 U.S.C. 651 et
seq.)
Existing law provides that parents have an equal responsibility
to support a minor child. (Fam. Code Sec. 3900 et seq.)
Existing law requires each county to maintain a local child
support agency responsible for establishing, modifying, and
enforcing child support obligations. (Fam. Code Sec. 17400.)
Existing law establishes the California Child Support Automation
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System to provide timely and accurate payment processing and
centralized disbursement from a single location in the state.
(Welf. & Inst. Code Sec. 10080 et seq.)
Existing law provides that the department and a local child
support agency shall have the responsibility for promptly and
effectively collecting and enforcing child support obligations,
and administering wage withholdings for that purpose. (Fam. Code
Sec. 17500.)
Existing law requires the local child support agency to submit
delinquencies to the department, and allows an agency to collect
a child support delinquency or enforce any lien by levy served
on all persons having in their possession, or who will have in
their possession or under their control, any credits or personal
property belonging to the delinquent support obligor, or who owe
any debt to the obligor at the time they receive the notice of
levy, including deposit or credits or personal property in the
possession or under the control of a bank, savings and loan
association, or other financial institution. (Fam. Code Secs.
17500, 17522, 17522.5, and 17523.)
Existing law , the Administrative Procedures Act (APA), provides
that no state agency shall issue, utilize, enforce, or attempt
to enforce any guideline, criterion, bulletin, annual,
instruction, order, standard of general application, or other
rule which is defined as a regulation, unless it has been
adopted pursuant to the APA. (Gov. Code Sec. 11340.5.)
Existing law defines a "regulation" as: every rule, regulation,
order, or standard of general application or the amendment,
supplement, or revision of any rule, regulation, order, or
standard adopted by any state agency to implement, interpret, or
make specific the law enforced or administered by it, or to
govern its procedure. (Gov. Code Sec. 11342.600.)
This bill would create the Insurance Payment Intercept Program
within the Department of Insurance (CDI), for purposes of
identifying insurance claims that are properly subject to
withholding to satisfy a child support obligation.
This bill would require the Department of Child Support Services
(DCSS) to facilitate a child support data match system, through
which an insurer or self-insurer shall report specified
information for a claimant.
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This bill would define a claim as (1) a claim against a life
policy or annuity, or (2) as coverage for an open, unresolved,
bodily injury claim that is payable by an insurer or
self-insurer to an individual for the following types of
insurance:
automobile liability coverage;
homeowner's liability coverage;
commercial liability insurance coverage;
liability insurance; and
workers' compensation coverage.
This bill would provide that an insurer, as specified, that
provides or attempts to provide data pursuant to this bill would
not be subject to civil liability that occurred as a result of
providing or attempting to provide data.
This bill would provide that data obtained pursuant to this bill
may only be used to identify support obligors, and would require
CDI to immediately destroy data that does not match that of
DCSS.
This bill would require an insurer to comply with applicable
state and federal laws for the protection of privacy and
security.
This bill would authorize the Insurance Commissioner to impose a
fine, up to $1000, for a violation of this bill and would
authorize the Commissioner to issue an order requiring
compliance.
This bill would allow CDI to issue guidance for compliance with
this program to insurers and self-insurers without following the
provisions of the Administrative Procedure Act (APA) until
January 1, 2019.
This bill would become operative on July 1, 2016.
COMMENT
1.Stated need for the bill
According to the author:
Child support recipients are not receiving the full amount of
financial support they are owed. The most recent census data
revealed that only 43 percent of recipients received full
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payment. Since 2011, the California Department of Insurance
(CDI) and the Department of Child Support Services (DCSS) have
collaborated on increasing voluntary participation of
insurance companies to assist in collecting child support, but
only about 1/4 of insurance companies are currently involved.
Currently, 309 out of approximately 1,240 insurance companies
participate in a voluntary program with the DCSS and CDI which
verifies that insurance payments made to individuals is first
used to pay owed child support.
Through this voluntary collaboration, approximately $17
million annually, or $1.4 million per month, is currently
being collected to help improve the quality of life for
children.
2.Temporary exemption from the Administrative Procedure Act
The Administrative Procedure Act (APA) establishes rulemaking
procedures and standards for state agencies in California. The
requirements set forth in the APA are designed to provide the
public with a meaningful opportunity to participate in the
adoption of state regulations and to ensure that regulations are
clear, necessary, and legally valid. In emergency situations,
where the adoption (or repeal) of a regulation is necessary for
the immediate preservation of the public peace, health, or
safety, an agency is not required to comply with all of the
public participation requirements of the APA. (See Gov. Code
Sec. 11346.1) In those situations, the agency is required to
take other action to ensure transparency and subsequent
participation by the public.
The APA is particularly important because many state agencies
effectively hold legislative, executive, and judicial power over
the industries they regulate. Thus, the APA represents the
basic level of protection that individuals and entities can
expect with respect to rulemaking by state agencies, and, as a
matter of public policy, agencies are not exempted from its
requirements absent compelling justification. This bill would
provide that "guidance" issued by the California Department of
Insurance (CDI) to insurers regarding compliance with the
Insurance Intercept Program, until January 1, 2019, is exempt
from the rulemaking provisions of the APA. The sponsor argues
that this provision is necessary because:
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Without the guidance, any CDI-issued interpretation, reporting
forms or other clarification would need to be performed
through a full rulemaking action under the Administrative
Procedure Act. This would necessarily delay the
implementation of the law by months, or even years, because of
the many procedural requirements and layers of review that a
full rulemaking would require.
By granting the CDI a limited window to implement these rules
through guidance in the beginning, the CDI and DCSS will have
the ability to quickly respond to questions and ambiguity in
order to maximize the effect of this bill. Through the
guidance process, we will hopefully 'work out the kinks' early
and obtain consensus between CDI, DCSS and reporting insurers
and self-insurers. At the same time, because the authority to
develop guidance will expire, this structure will allow and
CDI to promulgate any subsequent rules after any fundamental
questions are already resolved, thereby minimizing controversy
or public disagreement.
While the rulemaking process can be lengthy, the process is
necessary to ensure adequate public comment and transparency.
However, regarding intercepting insurance payments for child
support, the author claims that approximately 309 of 1,240
insurance companies in California participate voluntarily in the
program operated by DCSS and CDI. Through this collaboration,
approximately $17 million is collected every year. Therefore, a
program and protocols exist, even if it has only been used on a
voluntary basis, which would allow CDI and DCSS to continue
collecting support from insurance claims while CDI goes through
the rulemaking process under the APA.
The following amendment would remove the provision that CDI is
exempt from the rulemaking provisions of the APA.
Suggested amendment:
On page 6, strike lines 6-17.
3.Immunity for noncompliance in good faith
This bill would provide that any insurer, as specified, that
provides or attempts to provide data, is not subject to civil
liability for alleged or actual damages that occur as a result
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of providing or attempting to provide data. As a matter of
policy, immunity provisions are generally disfavored because
they act to preclude a party from recovering when he or she is
injured. Liability acts not only to allow a victim to be made
whole, but to encourage appropriate compliance with legal
requirements.
This immunity would prohibit an obligor (e.g., the person who
owes support) or an obligee (e.g., the recipient of support)
from recovering against an insurer who either took out too much
money from a claim the obligor is expecting, or gave too little
money to an obligee. In either situation, the parties may be
relying on receiving a certain amount of funds. Absent an
immunity provision, a custodial parent may be able to recover
the amount of money owed to her and any costs she incurred
because she did not receive the expected funds (e.g., late fees,
child care, etc.), and an obligor may be able to recover the
inappropriate amount withheld and any costs he or she incurred
as a result of the insurer's mistake. These amounts of money,
although perhaps small or insignificant to an insurance company,
may mean a lot to a parent struggling to make ends meet. Even
more troubling, this immunity would protect an insurer from
liability in the event that the company did not comply with
state or federal privacy laws, or committed gross negligence.
Alternatively, an insurer who complies with this bill arguably
should not be subject to civil liability for following the law
in good faith. The following language would revise the existing
immunity provision to ensure that insurers are immune from suit
if they follow the provisions of this bill in good faith.
Suggested amendment:
On page 5, strike lines 21-28 and insert "An insurer acting in
good faith that complies with this Article shall be immune
from civil liability to an individual or agency."
Support : Children's Advocacy Institute
Opposition : Alpha Fund; Association of California Healthcare
Districts; American Insurance Association; Association of
California Insurance Companies; Association of California Life
and Health Insurance Companies; Pacific Association of Domestic
Insurance Companies; Personal Insurance Federation of
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California; National Association of Mutual Insurance Companies;
California Insurance Wholesalers Association; California
Association of Joint Powers Authorities
HISTORY
Source : Insurance Commissioner Dave Jones
Related Pending Legislation : None Known
Prior Legislation : None Known
Prior Vote : Senate Insurance Committee (Ayes 6, Noes 0)
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