BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
730 (De La Torre)
Hearing Date: 8/24/2009 Amended: 8/18/2009
Consultant: Katie Johnson Policy Vote: Health 8-3
Judiciary 3-2
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BILL SUMMARY: AB 730 would increase the maximum civil penalty
for health insurance post-claims underwriting from $118 per
violation to $5,000 per violation. The bill would also increase
that amount to $10,000 for each act of post-claims underwriting
that the insurer knew was unlawful.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Penalties revenue unknown, but potentially
hundreds Special/*
of thousands of dollars General
*The first $118 of each penalty would go to the General Fund;
the balance would go to the Major Risk Medical Insurance Fund
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STAFF COMMENTS:
Existing law prohibits health care service plans and health
insurers from engaging in "post-claims underwriting," which is
defined as rescinding, canceling, or limiting a plan contract
due to a plan or insurer's failure to complete medical
underwriting and to resolve all reasonable questions arising
from written information submitted on or with an application
before issuing the plan contract or insurance policy.
Existing law authorizes the California Department of Insurance
(CDI) to impose civil penalties of up to $118 for each violation
of the standard provisions of insurance policies, including
incidences of post-claims underwriting.
Existing law establishes civil penalties of up to $2,500 per
violation for any person who violates any provision of the
Knox-Keene Health Care Service Plan Act of 1975, the law that
regulates health care service plans, as well as criminal
penalties, including a fine of up to $10,000, upon conviction
for willful violations.
This bill would increase the civil penalty on a health insurer
for each act of post-claims underwriting from $118 to a maximum
of $5,000, and up to $10,000 for each act or violation where the
health insurer knew, or had reason to know, that the act was
unlawful.
This bill would provide that the first $118 of any penalties
collected pursuant to these provisions would be deposited in the
state's General Fund, as under current law, and that the balance
of the penalties would be deposited in the Major Risk Medical
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AB 730 (De La Torre)
Insurance Fund to support the Major Risk Medical Insurance
Program (MRMIP), which provides health care coverage for
otherwise uninsurable Californians, as defined.
This bill would require that the civil penalties and
disciplinary actions provided for by these provisions be
determined at a hearing conducted in accordance with the
Administrative Procedure Act.
Costs to CDI to continue to assess penalties for post-claims
underwriting in accordance with these provisions would be minor
and absorbable. To the extent that insurers practice post-claims
underwriting and CDI collects penalties, there would be unknown,
increased revenue for the Major Risk Medical Insurance Fund.