BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 585|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: SB 585
Author: Leyva (D)
Amended: 5/5/15
Vote: 21
SENATE INSURANCE COMMITTEE: 6-0, 4/8/15
AYES: Roth, Gaines, Hall, Liu, Mitchell, Wieckowski
NO VOTE RECORDED: Berryhill, Hernandez
SENATE JUDICIARY COMMITTEE: 5-1, 4/28/15
AYES: Jackson, Hertzberg, Leno, Monning, Wieckowski
NOES: Anderson
NO VOTE RECORDED: Moorlach
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: Insurance payments: interception
SOURCE: Insurance Commissioner Dave Jones
DIGEST: This bill creates the Insurance Payment Intercept
Program within the California Department of Insurance (CDI), for
purposes of identifying insurance claims that are subject to
withholding to satisfy a child support obligation; requires all
insurers and self-insurers operating in the state to participate
in the Program; requires the Department of Child Support
Services (DCSS) to facilitate a data match system using
automated data exchanges through which an insurer or
self-insurer would be required to report, no later than 30 days
prior to a claim payout; authorizes the Insurance Commissioner
(IC) to impose a fine of not more than $1,000 on an insurer or
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self-insurer who violates the requirement to provide claim data
for a child support obligation match; authorizes the IC to issue
an order requiring the violator to comply; and takes effect on
July 1, 2016.
ANALYSIS:
Existing federal law:
1)Creates the federal Office of Child Support Enforcement (OCSE)
within the U.S. Department of Health and Human Services.
2)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.
Existing state law:
1)California law provides that a child's parents share equal
responsibility to support the child in a manner suitable to the
child's circumstances, and establishes the DCSS and other public
agencies to establish paternity and enforce liability for child or
spousal support.
2)Requires every employer and labor organization in the state to
provide specified information, including earnings information, to
the local child support agency or DCSS upon request.
3)Establishes the California Child Support Automation System to
provide timely and accurate payment processing and centralized
disbursement from a single location in the state.
4)Requires the Employment Development Department to withhold from
unemployment compensation benefits or unemployment compensation
disability benefits of individuals with unmet support obligations.
5)Provides that a local child support agency may 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
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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 as defined.
This bill:
1)Creates the Insurance Payment Intercept Program within the
CDI, for purposes of identifying insurance claims that are
properly subject to withholding to satisfy a child support
obligation.
2)Requires the DCSS to facilitate a child support data match
system through which all insurers operating in the state,
including admitted insurers, non-admitted foreign insurers,
non-admitted alien insurers, and self-insurers are required to
report potential claim match data no later than 30 days prior
to a claim payout for each claimant, as specified.
3)Specifies that the requirement applies to auto liability
coverage, homeowners' liability coverage, commercial liability
coverage, liability coverage, workers' compensation coverage,
life insurance policies and annuity policies.
4)Provides that if an insurer acts in good faith to comply with
this requirement, it is immune from civil liability to an
individual or agency.
5)Authorizes the IC to impose a fine of not more than $1,000 on
an insurer or self-insurer who violates the requirement to
provide claim data for a child support obligation match and
authorizes the IC to issue an order requiring the violator to
comply.
6)Takes effect July 1, 2016.
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Background
Noncustodial parents who do not pay court-ordered child support
are subject to enforcement measures to collect regular and
past-due payments. California currently uses a variety of tools
to encourage compliance with child support orders and ensure
payments are made, including income withholding, unemployment
insurance and workers' compensation benefits withholding, tax
refund offsets, state disability benefits, bank levies, property
liens, asset seizure, driver's license or professional license
suspension or revocation, passport denial, and civil or criminal
contempt charges.
OCSE works with the insurance industry to match insurance
claimants (and beneficiaries) to child support obligors in order
to help states in the collection of child support. OCSE in 2008
began the Insurance Match Program with insurers, agents or state
agencies, receiving claim information and provides matches to
the state child support agency responsible to collect the child
support from the delinquent obligors. This is a voluntary
program for state child support agencies, the insurance industry
(including insurers and their agents), state workers'
compensation agencies, and the U.S. Department of Labor. Each
state processes the matches according to its own laws and
policy.
Currently, OCSE is matching individuals delinquent in their
child support obligations with 20 state workers' compensation
agencies, over 577 insurance companies through the Insurance
Services Office and the U.S. Department of Labor. The types of
insurance subject to the program include annuity, disability,
life insurance, auto bodily injury liability, directors and
officers liability, errors and omissions liability, policy
surrender, and workers' compensation. By statute, insurers
cannot be held liable for participating in the match program.
Six states now require mandatory insurer participation-Texas,
Pennsylvania, New Jersey, Oklahoma, Rhode Island and
Massachusetts. The CDI in 2011 initiated a pilot project in
cooperation with the DCSS asking California insurers to
voluntarily agree to offset insurance benefit payments against
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delinquent child support obligations. According to the CDI,
currently 309 out of approximately 1,230 insurance companies
participate. This bill requires all insurers doing business in
the state to participate.
Comments
The Association of California Life and Health Insurance
Companies, the Personal Insurance Federation of California, the
Association of California Insurance Companies, the American
Insurance Association, the Pacific Association of Domestic
Insurance Companies, the National Association of Mutual
Insurance Companies, and the California Insurance Wholesalers
Association have withdrawn their opposition to the bill, and
have said they will continue to work with the author to address
some remaining implementation concerns.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified5/26/15)
Insurance Commissioner Dave Jones (source)
Children's Advocacy Institute
OPPOSITION: (Verified5/26/15)
ALPHA Fund
California Association of Joint Powers Authorities
ARGUMENTS IN SUPPORT: 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% of recipients received full payment. In California
alone, the total amount of unpaid child support is nearly $18
billion.
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According to the Insurance Commissioner, this bill's sponsor,
since 2011 the CDI and DCSS have worked to help increase
voluntary participation of insurance companies to assist in
collection past-due child support, but only about one quarter of
insurance companies are currently involved. Through this
voluntary collaboration, approximately $17 million is currently
being collected annually in California. This compares to Texas
which made this program mandatory and collected $463 million in
fiscal year 2014. Requiring insurance companies to participate
in the Insurance Payment Intercept Program will facilitate
collection of overdue child support and help improve the quality
of life for children in California. The Children's Advocacy
Institute supports SB 585 because it will provide children with
the crucial monetary support needed to foster a healthy living
environment.
ARGUMENTS IN OPPOSITION: The ALPHA Fund, a self-insurance
pool that provides workers' compensation coverage for Health
Care Districts, public and non-profit hospitals, clinics, home
health, hospice and nursing facilities, opposes SB 585 because
it creates another burdensome and costly reporting mandate, and
potential delays and increased legal costs in the resolution of
claims. The California Association of Joint Powers Authorities
opposes SB 585 because it firmly believes this is a
responsibility of the state, not a public and private sector
business obligation.
Prepared by:Erin Ryan / INS. / (916) 651-4110
5/26/15 16:36:06
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