BILL ANALYSIS
SENATE COMMITTEE ON BANKING, FINANCE,
AND INSURANCE
Senator Ronald Calderon, Chair
AB 591 (De La Torre) Hearing Date: July 9, 2009
As Amended: June 1, 2009
Fiscal: Yes
Urgency: No
SUMMARY Would require health care service plans and health
insurers to annually file with their regulator a list
identifying by form number and marketing name their plans or
policies with more than 50,000 covered individuals and would
increase the maximum penalty for violating the prohibition on
unlawful referrals for compensation in relation to auto
insurance claims from $1,000 to $5,000.
DIGEST
Existing law Applicable to Health Plans and Health Insurers
1. Provides for regulation of health plans by the Department of
Managed Health Care (DMHC) pursuant to the Knox-Keene Health
Care Service Plan Act of 1975 (Knox-Keene) and for regulation of
health insurers by the California Department of insurance (DOI)
under the Insurance Code.
2. Authorizes health plans to offer and sell health care service
plan contracts and authorizes health insurers to offer and sell
health insurance policies, as specified.
3. Requires health plans licensed under Knox-Keene to cover all
medically necessary basic health care services, as defined.
Defines basic health care services to include: physician
services; hospital inpatient and outpatient services, including
outpatient physical, occupational, and speech therapy;
diagnostic laboratory and X-ray services; preventive and routine
care, such as vaccinations and routine checkups; emergency and
urgent care services, including ambulance and out-of-area
emergency services; and, medically appropriate home health
services. Requires Knox-Keene plans to assume full financial
risk for services covered under a plan contract.
AB
591 (De La Torre) Page 2
4. There is no requirement for health insurers subject to
regulation by the DOI to cover "basic health care services" or
to make coverage decisions for basic benefits based on medical
necessity.
5. Requires every health plan and every health insurer, to cover
or offer coverage for, specified mandated benefits or types of
coverage. Mandated benefits and mandated offerings may apply to
individual coverage, group coverage, or both, depending on the
statutory requirements related to that benefit, and in most
instances, apply equally to health plans and health insurers.
There are some specific mandates or mandated offerings that
apply only to health plans or only to health insurers.
Existing law Regarding Unlawful Referrals for Services Reimbursed by
Automobile Insurance
6. Prohibits referral fees by making it unlawful for any person to
solicit, receive, offer, or pay any referral fee for the
referral of an individual for the furnishing of services or
goods for which the person knows or should have known whole or
partial reimbursement is or may be made, directly or indirectly,
by any insurer. This prohibition applies to all forms of
insurance covering a motor vehicle, including commercial and
personal lines, and comprehensive coverage, property damage
coverage, collision coverage, and liability coverage.
7. For purposes of that prohibition, a referral fee is a fee paid
by a person furnishing goods or services to another in return
for the referral of an individual to that person for the
furnishing of services or goods. It includes any referral fee,
kickback, bribe, or rebate, whether made directly or indirectly,
overtly or covertly, or in cash or in kind but excludes any
discount or similar reduction in price, and referral fees
between attorneys if legal services are provided under a
contingency fee arrangement if the referral fee is consistent
with the Rules of Professional Conduct of the State Bar of
California.
8. Violations of this prohibition on referrals is a misdemeanor
punishable by a fine not to exceed one thousand dollars ($1,000)
for each violation and actions to enforce the prohibition may be
brought by any district attorney or other prosecuting attorney.
AB
591 (De La Torre) Page 3
This bill
1.Requires health care service plans and health insurers to
annually file with the Director of the Department of Managed
Health Care and the Insurance Commissioner a list identifying
the form number and marketing name of contracts and health
insurance policies with more than 50,000 subscribers and
enrollees (in the case of entities subject to DMHC and 50,000
insureds (in the case of insurers regulated by the DOI). The
two departments are required to use the form number and
marketing name for purposes of tracking the health plan.
2.Increases from $1,000 to $5,000 the maximum fine for violating
the law, applicable solely to matters involving auto
insurance, against soliciting, receiving, offering, or paying
a referral fee for referral of an individual for the
furnishing of services or goods which the person knows or
should know that reimbursement is or may be made by an
automobile insurer.
COMMENTS
1. Purpose of the bill. According to the author, who is the
bill sponsor, Assembly Bill 591 will ensure consumers'
interests are placed first and protected from being misled
to a specific service provider because the referrer receives
compensation. Too many times individuals are referred
believing that the referral is in the consumers' best
interest. However, there are instances where the referrer
is getting compensated/kickbacks. By increasing the penalty
to not exceed $5000 will deter individuals from referring
for kickbacks and instead place the consumers' interest
first.
2. The author also states AB 591 will ensure that information
about health plans and health insurers is readily accessible
by consumers. Consumers are only aware of their health
plans and health insurers by their marketing name.
Currently, if you call the departments you would have to
know the form number of the health plan or health insurer to
receive additional information. By requiring that the
product's marketing name be tracked along with the form
number will allow for consumers to more readily access
information about their health plans or health insurer.
AB
591 (De La Torre) Page 4
3. The California Department of Managed Health Care is opposed
to this bill. DMHC states "AB 591 will place unnecessary
and expensive burdens upon both the DMHC and the health
plans it regulates for no clearly defined reason. The stated
purpose for this bill is to ensure consumers have access to
information regarding their health plans, but there is no
need for this legislation because health plans are already
required to provide enrollees with a full and fair
disclosure of the provisions of the plan in readily
understood language and in a clearly organized manner."
DMHC also states that the bill "is based on a fundamental
misconception about the nature of health plan products.
This bill models its provisions after an existing law
pertaining to the highly-standardized Medicare Supplement
contract. However, unlike Medicare contracts, commercial
health products have negotiable benefits and can vary widely
depending on an enrollee's employer group. AB 591 fails to
recognize this crucial distinction, and proposes superficial
semantic changes that would not actually implement the bill
author's intent."
4. Background AB 591's two provisions are intended individually
to offer benefit to consumers and improve the operation of
the insurance marketplace but these consumer protection
provisions do not operate together. One concerns health
plans and health insurance, the other matters relating to
automobile insurance.
5. The prohibition on referral fees amended by Section 2 of
this bill was enacted in 1990 and has not been subject to
change since that time. By its own terms, it applies only to
the forms of insurance "covering a motor vehicle, including
commercial and personal lines and various specific motor
vehicle-related coverages such as comprehensive, property
damage, collision and liability. The provision was added
during the 1989-90 legislative session at a time of
dramatically escalating auto insurance costs, and high auto
insurance claim fraud, in an effort to ease an important
cost driver affecting the cost of auto insurance.
6. The DMHC does not expressly state why the form number and
plan marketing name reporting requirement of AB 591, and the
requirement that this information be used of those for
tracking purposes, will lead to "unnecessary and expensive
burdens" for DMHC and health plans it oversees. Although
AB
591 (De La Torre) Page 5
the DMHC does say plan customization is common in the
marketplace, the 50,000 enrollee cap for triggering the
notice duty would appear to significantly limit the burdens
associated with AB 591.
7. Support None
8. Opposition Department of Managed Health Care (DMHC)
9. Interest The Association of California Life and Health
Insurance Companies is neutral on the bill but has suggested
to the author that the health care service plan and insurer
reporting requirement be narrowed in scope to focus on
primary and active health insurance programs by amending it
to exclude from its coverage:
1. products which are no longer being marketed,
and
2. specialized health insurance policies
providing covered benefits in a single specialized
area of health care, including dental-only,
vision-only, and behavioral health-only policies.
10. Questions None
11. Suggested Amendments None
12. Prior Legislation California Insurance Code Section 754,
prohibiting unlawful referrals for compensation, was added
by A.B. 2909 of 1990, enacted as Chapter 255 of the Statutes
of 1990.
POSITIONS
Support
None
Oppose
Department of Managed Health Care (DMHC)
Principal Consultant: Kenneth Cooley (916) 651-4102