BILL ANALYSIS
AB 730
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 730 (De La Torre)
As Amended August 18, 2009
Majority vote
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|ASSEMBLY: |53-23|(May 28, 2009) |SENATE: |22-16|(September 3, |
| | | | | |2009) |
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Original Committee Reference: HEALTH
SUMMARY : Increases the maximum civil penalty for health
insurance post-claims underwriting from $118 per violation to
$5,000 per violation for insurers under the jurisdiction of the
Commissioner of the California Department of Insurance (CDI).
Specifically, this bill :
1)Increases the maximum civil penalty for each act of
post-claims underwriting, as prohibited in the Insurance Code,
from $118 to a maximum of $5,000 for each act, 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.
2)Requires that the first $118 of each penalty collected for
post-claims underwriting violations be deposited in the
General Fund and the balance of any penalty revenue be
deposited in the Major Risk Medical Insurance Fund to be used,
upon appropriation by the Legislature, for the Major Risk
Medical Insurance Program (MRMIP).
3)Requires civil penalties and disciplinary actions imposed
against insurers for specified violations of the Insurance
Code, including post-claims underwriting violations, to be
determined at a hearing conducted in accordance with the
Administrative Procedures Act.
The Senate amendments:
1)Make the increased penalties in this bill a civil penalty in
lieu of the $118 civil penalty for violations of the Insurance
Code.
2)Require that the first $118 of each penalty collected for
post-claims underwriting violations be deposited in the
AB 730
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General Fund and the balance of any penalty revenue be
deposited in the Major Risk Medical Insurance Fund to be used
upon appropriation by the Legislature for the Major Risk
Medical Insurance Program (MRMIP).
EXISTING LAW :
1)Provides for regulation of health plans by the Department of
Managed Health Care (DMHC) under the Knox-Keene Health Care
Service Plan Act of 1975 (Knox-Keene) and for regulation of
disability insurers who sell health insurance (health
insurers) by the CDI under the Insurance Code.
2)Prohibits health plans and health insurers from engaging in
"post-claims underwriting," defined as rescinding, canceling,
or limiting of a plan contract due to a plan or insurer's
failure to complete medical underwriting and resolve all
reasonable questions arising from written information
submitted on or with an application before issuing the plan
contract or policy. For health plans regulated by DMHC,
provides that the prohibition against post-claims underwriting
does not limit a plan's remedies upon a showing of willful
misrepresentation.
3)Prohibits a health plan or health insurer from rescinding or
modifying an authorization for services after the service is
rendered, for any reason, including but not limited to, the
health plan or health insurer's subsequent rescission,
cancellation, or modification of the enrollee or insured's
contract or policy, or the health plan or health insurer's
subsequent determination that the carrier did not make an
accurate determination of the enrollee or subscriber's
eligibility.
4)Prohibits, specifically, health insurers, but not health
plans, from voiding (rescinding) a policy or denying a claim
based on misstatements in the application after two years,
except for fraudulent misrepresentations, sometimes referred
to as an "incontestability clause" for insurance purposes.
5)Authorizes, under the Insurance Code, the Insurance
Commissioner, after appropriate notice and opportunity for a
hearing, to impose civil penalties of up to $118 for each
violation of specified provisions of the Insurance Code
relating to disability insurance, including the prohibition
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against post-claims underwriting. Authorizes civil penalties
for certain unfair or deceptive acts or practices, or for
violations of specified orders issued by the Commissioner, of
up to $5,000 for each act, or up to $10,000 for each willful
act, and imposes penalties of up to $55,000 for certain
violations of specified cease and desist or court orders.
6)Authorizes, under Knox-Keene, the Director of DMHC, after
appropriate notice and opportunity for a hearing, to by order
suspend or revoke any license issued under Knox-Keene, or to
assess administrative penalties of any amount, if the Director
determines that the licensee has committed specified acts or
omissions constituting grounds for disciplinary action,
establishes civil penalties of up to $2,500 per violation for
any person who violates any provision of Knox-Keene, and
establishes criminal penalties of up to $10,000 for willful
violations.
7)Establishes the MRMIP, administered by the Managed Risk
Medical Insurance Board, to provide health coverage for
individuals unable to purchase coverage, because they have
been denied health coverage by at least one private health
plan or are offered only limited coverage or coverage
significantly above standard average individual rates, as
determined by MRMIB.
AS PASSED BY THE ASSEMBLY , this bill was substantially similar
to the version passed by the Senate.
FISCAL EFFECT : According to the Senate Appropriations
Committee, costs to CDI to continue to assess penalties for
post-claims underwriting in accordance with this bill 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 MRMIP.
Analysis Prepared by : Deborah Kelch / HEALTH / (916) 319-2097
FN: 0002780