BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: AB 591
A
AUTHOR: De La Torre
B
AMENDED: As proposed to be amended
HEARING DATE: July 15, 2009
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CONSULTANT:
9
Park/
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SUBJECT
Insurance: referral fees: health plans and insurance:
filings
SUMMARY
Increases the maximum penalty for violating the prohibition
on unlawful referrals for compensation in relation to auto
insurance claims from $1,000 to $5,000. Requires health
insurers under the jurisdiction of the California
Department of Insurance (CDI) to annually file with their
regulator a list identifying by form number and marketing
name their policies with more than 50,000 covered
individuals. Requires health plans under the jurisdiction
of the Department of Managed Health Care (DMHC) to file
with DMHC a copy of each of its plan contracts, as
specified. Requires health plans and health insurers that
issue identification cards to its enrollees and insureds to
provide information on those cards, as specified.
CHANGES TO EXISTING LAW
Existing law:
Existing law provides for regulation of health plans by the
Department of Managed Health Care (DMHC) and for regulation of
health insurers by the California Department of insurance
(CDI).
Continued---
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Existing law 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.
Existing law requires full service health plans licensed by
DMHC to provide basic health care services, as defined.
Existing law requires health care service plans and health
insurers to comply with certain administrative
requirements, premium requirements, patient protection
requirements, fiduciary and financial requirements,
provider access requirements, and to provide certain
mandated benefits to enrollees.
Existing law establishes the Office of the Patient Advocate
(OPA) to represent the interests of health plan enrollees
and to help those enrollees to secure health care services
to which they are entitled under the laws administered by
DMHC. Existing law sets forth the duties of OPA to include,
but not be limited to: developing educational and
informational guides for consumers describing enrollee
rights and responsibilities, and informing enrollees on
effective ways to exercise their rights to secure health
care services; compiling an annual publication, to be made
available on DMHC's Internet Web site, of a quality of care
report card, including, but not limited to, health care
service plans; rendering advice and assistance to enrollees
regarding procedures, rights, and responsibilities related
to the use of health care service plan grievance systems,
the DMHC's system for reviewing unresolved grievances, and
the independent review process; making referrals within
DMHC regarding studies, investigations, audits, or
enforcement that may be appropriate to protect the
interests of enrollees; coordinating and working with other
government and nongovernment patient assistance programs
and health care ombudsperson programs.
Existing law requires health plans to establish a grievance
system approved by DMHC, which includes informing subscribers
and enrollees of the procedure for processing and resolving
grievances, including the location and telephone number where
grievances may be submitted. Existing law authorizes DMHC to
require enrollees and subscribers to participate in a plan's
grievance process for up to 30 days before pursuing a grievance
through DMHC or through the independent medical review system,
authorized in current law to review disputed health care
STAFF ANALYSIS OF ASSEMBLY BILL 591 (De La Torre) Page
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services, as defined. Existing law requires the Director of
DMHC to establish and maintain a toll-free telephone number for
the purposes of receiving complaints regarding health plans
regulated by DMHC. Existing law requires health plans to
publish DMHC's toll-free telephone number, TDD line for the
hearing and speech impaired, the plan's telephone number, and
DMHC's Internet address on every plan contract, evidence of
coverage, copies of plan grievance procedures, on plan
complaint forms, and on other forms, as specified.
Existing law provides that all enrollee and insured
grievances involving a disputed health care service, as
defined, are eligible for review under the independent
medical review system. Existing law provides that if DMHC
or CDI finds that an enrollee or insured grievance
involving a disputed health care service does not meet the
requirements for independent medical review, the enrollee
or insured request for review shall be treated as a request
for the department to review the grievance. Existing law
specifies that all other enrollee or insured grievances,
including grievances involving coverage decisions, remain
eligible for review by the entity that regulates the health
plan or health insurer.
Existing law 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. Existing law provides
that 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.
This bill:
This bill would increase from $1,000 to $5,000 the maximum
fine for violating the law, applicable 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.
STAFF ANALYSIS OF ASSEMBLY BILL 591 (De La Torre) Page
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The bill would require health insurers to annually file
with the Insurance Commissioner a list of health insurance
policies with more than 50,000 insureds, identifying the
form number and marketing name. The bill would require
health plans to annually file with DMHC a copy of each plan
contract, and a list of marketing names used for those
contracts if any.
The bill would require a health plan or health insurer that
issues identification cards to enrollees or insureds to
identify the entity that regulates the plan or insurer, and
include, at least, the appropriate telephone number of the
regulator that an enrollee or insured may call for purposes
of submitting a grievance to the regulator. The bill would
require the health plan or insurer to update identification
cards issued to enrollees or insureds prior to January 1,
2010, with this information.
FISCAL IMPACT
According to the Assembly Appropriations Committee, the
prior version of the bill would result in annual
fee-supported special fund costs of $500,000 to DMHC and
CDI, combined, to receive plan and insurer contracts that
have been offered, issued, or are outstanding. DMHC
indicates the department will need to track and file
thousands of health plan contracts. It is unclear how
recent amendments may change the fiscal impact.
That committee also notes minor absorbable workload to CDI
to continue oversight of car insurance policies and
professionals.
BACKGROUND AND DISCUSSION
According to the author, the bill will ensure consumers'
interests are placed first and ensure that they are
protected from being misled to a specific service provider
because the referrer receives compensation. The author
notes that, 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
STAFF ANALYSIS OF ASSEMBLY BILL 591 (De La Torre) Page
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penalty to $5,000, the author believes the measure will
deter individuals from referring for kickbacks and,
instead, place the consumers' interest first.
The author also states the bill will ensure that
information about health plans and health insurers is
readily accessible by consumers. The author asserts that
consumers are only aware of their health plans and health
insurers by their marketing name, and that, 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, the
author believes that the bill will help consumers to more
readily access information about their health plans or
health insurer. The author points out that health plans and
health insurers are already required to report the form
number and marketing name for Medicare supplemental
contracts and insurances. The author states that this
measure would simply expand this existing reporting
requirement to other plans and insurances offered across
the State.
Referral fees
According to the Senate Banking, Finance, and Insurance
Committee, the prohibition on referral fees was enacted in
1990 and has not been subject to change since that time.
It applies only to the forms of insurance covering a motor
vehicle, including commercial and personal lines and
various specific motor vehicle-related coverage, such as
comprehensive, property damage, collision, and liability
coverage. 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.
Related legislation
SB 296 (Lowenthal) of 2009 requires health plans, including
specialized health plans, and insurers that offer
professional mental health services to direct those
services to be provided in a coordinated manner, establish
websites that contain particular information by January 1,
2012, and provide benefit cards by July 1, 2011, as
STAFF ANALYSIS OF ASSEMBLY BILL 591 (De La Torre) Page
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specified. Pending in the Assembly Health Committee.
Prior legislation
SB 1553 (Lowenthal), Chapter 722, Statutes of 2008, among
its provisions, requires the Internet websites of health
plans that provide coverage for professional mental health
services to include, but not be limited to, providing
information for subscribers, enrollees, and providers on
accessing mental health services. (A prior version of this
bill would have required health plans to issue a benefits
card to enrollees, containing at a minimum: the name of the
benefit administrator or health care service plan issuing
the card, the enrollee's identification number, or the
subscriber's identification number, when applicable as
specified, a telephone number that providers may call for
assistance, information required by the benefit
administrator or health care service plan necessary to
commence processing a claim, as specified.)
Arguments in opposition
DMHC writes, in reference to the version prior to the
author's proposed amendments, that the bill will place
unnecessary and expensive burdens upon both the DMHC and
the health plans it regulates for no clearly defined
reason. DMHC writes that 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 states that the bill
models its provisions after an existing law pertaining to
the highly standardized Medicare Supplement contract, but
unlike Medicare contracts, commercial health plan products
have negotiable benefits and can vary widely depending on
an enrollee's employer group. DMHC believes that the
measure fails to recognize this distinction and proposes
superficial, semantic changes that would not actually
implement the author's intent.
PRIOR ACTIONS
Senate BFI: 8-1
Assembly Floor: 76-1
Assembly Appropriations:12-5
STAFF ANALYSIS OF ASSEMBLY BILL 591 (De La Torre) Page
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Assembly Health: 19-0
Assembly Insurance: 10-0
COMMENTS
1.Analysis reflects bill, as proposed to be amended.
This analysis reflects the bill, as proposed to be
amended. The amendments are attached, and they: 1)
eliminate the requirement for health plans (but not
health insurers) to annually file with the regulator a
list identifying by form number and marketing name their
plans or policies with more than 50,000 covered
individuals, and, instead, require health plans to
annually file to with their regulator a copy of each plan
contract, and a list of marketing names used for those
contracts, if any; 2) require a health plan or health
insurer that issues identification cards to enrollees or
insureds to identify the entity that regulates the plan
or insurer, and include, at least, the appropriate
telephone number of the regulator that an enrollee or
insured may call for purposes of submitting a grievance
to the regulator; and 3) require the health plan or
insurer to update identification cards issued to
enrollees or insureds prior to January 1, 2010, with the
information above.
2.Differing requirements under DMHC and CDI.
It is unclear why the filing requirements noted above
differ for health plans regulated under DMHC and health
insurers regulated under CDI. The author may wish to
explain why the differences in filing requirements are
necessary and how they further consumer protection under
the respective regulatory departments.
3.Clarifying amendment.
Staff recommends the following clarifying amendment:
Section 1363.08. If a health care service plan issues
identification cards to enrollees, the cards shall
identify the department as the entity that regulates
the plan and shall include, but not be limited to, the
appropriate telephone number of the department that an
enrollee may call for the purposes of obtaining
assistance or information about submitting a grievance
STAFF ANALYSIS OF ASSEMBLY BILL 591 (De La Torre) Page
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to either the health plan or the department pursuant
to subdivision (b) of Section 1368. A plan shall
update identification cards issued to enrollees prior
to January 1, 2010, with the information required by
this section.
4.Compliance date.
The bill requires health plans and health insurers to
update identification cards issued to enrollees and
insureds prior to January 1, 2010, with the information
about the regulator and how to contact the regulator. It
is unclear by what date a plan or insurer shall update
these identification cards with the new information. The
author may wish to clarify whether plans and insurers
must comply with this requirement by January 1, 2010,
(i.e., issuing a new round of cards on January 1, 2010),
or some later date; and whether cards issued prior to
January 1, 2010, with this information shall be deemed
already compliant.
POSITIONS
Support: None received
Oppose: Department of Managed Health Care (prior to
proposed amendments)
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