BILL NUMBER: AB 2594 CHAPTERED 09/29/00 CHAPTER 843 FILED WITH SECRETARY OF STATE SEPTEMBER 29, 2000 APPROVED BY GOVERNOR SEPTEMBER 28, 2000 PASSED THE ASSEMBLY AUGUST 22, 2000 PASSED THE SENATE AUGUST 18, 2000 AMENDED IN SENATE JUNE 19, 2000 AMENDED IN ASSEMBLY MAY 31, 2000 AMENDED IN ASSEMBLY MAY 26, 2000 AMENDED IN ASSEMBLY MAY 3, 2000 INTRODUCED BY Assembly Member Cox FEBRUARY 25, 2000 An act to amend Section 650 of the Business and Professions Code, to amend Sections 750 and 1873 of the Insurance Code, and to amend Section 549 of the Penal Code, relating to insurance. LEGISLATIVE COUNSEL'S DIGEST AB 2594, Cox. Insurance fraud. Existing law relative to insurance fraud generally provides that it is a crime for healing arts practitioners to receive money or other consideration for, or to engage in various related activities with respect to, the referral of patients, clients, or customers to any person, with certain exceptions, as specified. Similar provisions in the Insurance and Penal Codes apply to persons engaged in the processing, presenting, or negotiation of claims and to persons in general. Existing law specifies varying criminal penalties for these various offenses, generally providing for a fine of up to $10,000 or one year in jail or prison, or both the fine and imprisonment, as specified. This bill would instead provide, upon a first conviction, for a fine of up to $50,000 for these related public offenses and the possibility of one year in jail or prison, or both the fine and imprisonment. This bill would provide for a 2nd or subsequent conviction to be punishable by imprisonment in the state prison or by that imprisonment and a $50,000 fine. Existing law authorizes certain peace officers to submit a written request to an insurer for relevant information that the insurer may have relating to insurance fraud. This bill would correct certain erroneous cross-references in that authorization provision. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 650 of the Business and Professions Code is amended to read: 650. Except as provided in Chapter 2.3 (commencing with Section 1400) of Division 2 of the Health and Safety Code, the offer, delivery, receipt, or acceptance by any person licensed under this division of any rebate, refund, commission, preference, patronage dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for referring patients, clients, or customers to any person, irrespective of any membership, proprietary interest or coownership in or with any person to whom these patients, clients or customers are referred is unlawful. The payment or receipt of consideration for services other than the referral of patients which is based on a percentage of gross revenue or similar type of contractual arrangement shall not be unlawful if the consideration is commensurate with the value of the services furnished or with the fair rental value of any premises or equipment leased or provided by the recipient to the payer. Except as provided in Chapter 2.3 (commencing with Section 1400) of Division 2 of the Health and Safety Code and in Sections 654.1 and 654.2, it shall not be unlawful for any person licensed under this division to refer a person to any laboratory, pharmacy, clinic (including entities exempt from licensure pursuant to Section 1206 of the Health and Safety Code), or health care facility solely because the licensee has a proprietary interest or coownership in the laboratory, pharmacy, clinic, or health care facility; provided, however, that the licensee's return on investment for that proprietary interest or coownership shall be based upon the amount of the capital investment or proportional ownership of the licensee which ownership interest is not based on the number or value of any patients referred. Any referral excepted under this section shall be unlawful if the prosecutor proves that there was no valid medical need for the referral. "Health care facility" means a general acute care hospital, acute psychiatric hospital, skilled nursing facility, intermediate care facility, and any other health facility licensed by the State Department of Health Services under Chapter 2 (commencing with Section 1250) of Division 2 of the Health and Safety Code. A violation of this section is a public offense and is punishable upon a first conviction by imprisonment in the county jail for not more than one year, or by imprisonment in the state prison, or by a fine not exceeding fifty thousand dollars ($50,000), or by both that imprisonment and fine. A second or subsequent conviction is punishable by imprisonment in the state prison or by imprisonment in the state prison and a fine of fifty thousand dollars ($50,000). SEC. 2. Section 750 of the Insurance Code is amended to read: 750. (a) Except as provided in Section 750.5, any person acting individually or through his or her employees or agents, who engages in the practice of processing, presenting, or negotiating claims, including claims under policies of insurance, and who offers, delivers, receives, or accepts any rebate, refund, commission, or other consideration, whether in the form of money or otherwise, as compensation or inducement to or from any person for the referral or procurement of clients, cases, patients, or customers, is guilty of a crime. (b) A violation of subdivision (a) is punishable upon a first conviction by imprisonment in the county jail for not more than one year, or by imprisonment in the state prison, or by a fine not exceeding fifty thousand dollars ($50,000), or by both that imprisonment and fine. A second or subsequent conviction is punishable by imprisonment in the state prison or by imprisonment in the state prison and a fine of fifty thousand dollars ($50,000). (c) Nothing in this section shall prohibit a licensed collection or lien agency from receiving a commission on the collection of delinquent debts nor prohibits the agency from paying its employees a commission for obtaining clients seeking collection on delinquent debts. (d) Nothing in this section is intended to limit, restrict, or in any way apply to, the rebating of commissions by insurance agents or brokers, as authorized by Proposition 103, enacted by the people at the November 8, 1988, general election. SEC. 3. Section 1873 of the Insurance Code is amended to read: 1873. (a) Upon written request to an insurer by officers designated in subdivisions (a) and (b) of Section 830.1 and subdivision (a) of Section 830.2, and subdivisions (a), (c), and (i) of Section 830.3 of the Penal Code, an insurer, or agent authorized by that insurer to act on behalf of the insurer, shall release to the requesting authorized governmental agency any or all relevant information deemed important to the authorized governmental agency that the insurer may possess relating to any specific insurance fraud. Relevant information may include, but is not limited to, all of the following: (1) Insurance policy information relevant to the insurance fraud under investigation, including, but not limited to, any application for a policy. (2) Policy premium payment records which are available. (3) History of previous claims made by the insured. (4) Information relating to the investigation of the insurance fraud, including statements of any person, proof of loss, and notice of loss. (5) Complete copies of both sides of payment drafts. (b) The provisions of subdivision (a) shall not operate to authorize disclosure of medical information not otherwise authorized for disclosure pursuant to law. SEC. 4. Section 549 of the Penal Code is amended to read: 549. Any firm, corporation, partnership, or association, or any person acting in his or her individual capacity, or in his or her capacity as a public or private employee, who solicits, accepts, or refers any business to or from any individual or entity with the knowledge that, or with reckless disregard for whether, the individual or entity for or from whom the solicitation or referral is made, or the individual or entity who is solicited or referred, intends to violate Section 550 of this code or Section 1871.4 of the Insurance Code is guilty of a crime, punishable upon a first conviction by imprisonment in the county jail for not more than one year or by imprisonment in the state prison for 16 months, two years, or three years, or by a fine not exceeding fifty thousand dollars ($50,000), or by both that imprisonment and fine. A second or subsequent conviction is punishable by imprisonment in the state prison or by imprisonment in the state prison and a fine of fifty thousand dollars ($50,000).