BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 730|
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THIRD READING
Bill No: AB 730
Author: De La Torre (D)
Amended: 8/18/09 in Senate
Vote: 21
SENATE HEALTH COMMITTEE : 8-3, 7/8/09
AYES: Alquist, Cedillo, DeSaulnier, Leno, Maldonado,
Negrete McLeod, Pavley, Wolk
NOES: Strickland, Aanestad, Cox
SENATE JUDICIARY COMMITTEE : 3-2, 7/14/09
AYES: Corbett, Florez, Leno
NOES: Harman, Walters
SENATE APPROPRIATIONS COMMITTEE : 8-5, 8/24/09
AYES: Kehoe, Corbett, Hancock, Leno, Oropeza, Price, Wolk,
Yee
NOES: Cox, Denham, Runner, Walters, Wyland
ASSEMBLY FLOOR : 53-23, 5/28/09 - See last page for vote
SUBJECT : Health insurance: unlawful postclaims
underwriting of
policies: penalties
SOURCE : Department of Insurance
DIGEST : This bill increases the maximum civil penalty
for health insurance post-claims underwriting from $118 per
violation to $5,000 per violation. The bill also increases
CONTINUED
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that amount to $10,000 for each act of post-claims
underwriting that the insurer knew was unlawful.
ANALYSIS : 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 Department of Insurance 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 increases 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 provides 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 Insurance Fund to support the Major Risk
Medical Insurance Program (MRMIP), which provides health
care coverage for otherwise uninsurable Californians, as
defined.
This bill requires 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.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
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
Costs to the Department of Insurance 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
the Department collects penalties, there would be unknown,
increased revenue for the Major Risk Medical Insurance
Fund.
SUPPORT : (Verified 8/25/09)
Department of Insurance (source)
AIDS Healthcare Foundation
California Association of Marriage and Family Therapists
California Medical Association
California Psychological Association
Latino Coalition for a Healthy California
Professional Fiduciary Association
ARGUMENTS IN SUPPORT : According to the Department of
Insurance, $5,000 for each violation of post-claims
underriting and $10,000 for willful violations, established
in this bill, are at the standard level for the
Department's major fines and will make it clear that
illegal rescission of health insurance is an especially
noteworthy violation of law. The California Medical
Association supports parity between the two oversight
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agencies regulating health care with regard to these
penalties. The California Association of Marriage and
Family Therapists (CAMFT) states that rescission of an
insurer contract generally occurs after expensive claims
have been submitted by the patient, prompting insurers to
comb through a patient's original application file to
discover any discrepancy within the application, no matter
how minute. CAMFT states that when insurers rescind
coverage, patients are left with exorbitant medical costs.
CAMFT believes that the measure will protect consumers from
these post-claims underwriting practices by increasing the
penalty for such unlawful practices.
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Beall, Block, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Coto, Davis, De La Torre, De Leon, Eng, Evans,
Feuer, Fong, Fuentes, Furutani, Galgiani, Hall, Hayashi,
Hernandez, Hill, Huber, Huffman, Jones, Krekorian, Lieu,
Logue, Bonnie Lowenthal, Ma, Mendoza, Monning, Nava, John
A. Perez, V. Manuel Perez, Portantino, Price, Ruskin,
Salas, Saldana, Skinner, Solorio, Swanson, Torlakson,
Torres, Torrico, Tran, Yamada, Bass
NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill,
Blakeslee, Conway, Cook, DeVore, Fletcher, Fuller,
Gaines, Garrick, Gilmore, Hagman, Harkey, Jeffries,
Knight, Miller, Niello, Nielsen, Silva, Smyth, Villines
NO VOTE RECORDED: Duvall, Emmerson, Nestande, Audra
Strickland
RJG:nl 8/26/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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