BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 745|
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THIRD READING
Bill No: AB 745
Author: Coto (D)
Amended: 5/7/09 in Assembly
Vote: 21
SENATE BANKING, FINANCE, AND INS. COMMITTEE : 8-0, 7/9/09
AYES: Calderon, Correa, Florez, Kehoe, Liu, Lowenthal,
Padilla, Runner
NO VOTE RECORDED: Cogdill, Cox, Harman, Price
ASSEMBLY FLOOR : 73-0, 5/14/09 - See last page for vote
SUBJECT : Self-funded dental benefit plans
SOURCE : California Dental Association
DIGEST : This bill requires the third party administrator
of a self-funded dental benefit plan to include a
disclosure in the explanation of benefits document and
benefit claim forms which provides the contact information
for the federal Department of Labor, which regulates
self-funded plans, in the event the consumer has a payment
dispute with the plan.
ANALYSIS :
Existing Federal Law
1. The Employee Retirement Income Security Act of 1974
(ERISA), sets minimum standards for the regulation of
CONTINUED
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any private-sector plan, created when an employer or
union compensates employees in the form of pensions and
other benefits, including employer-sponsored health
coverage.
2. ERISA is basically a law of fiduciaries and trusts. Its
main purposes include making sure, within a voluntary
framework for the provision of employee benefits, that
plan sponsors follow through on promises to provide
pensions and other benefits, including health coverage.
3. As used under ERISA, "health plan" is a form of legal
entity which arises when an employer promises to provide
and pay for employee health benefits. Under ERISA, such
self-funded health plans can include multiple employer
welfare arrangements, as alternatives to health
insurance programs, health maintenance organizations,
and preferred provider organizations.
4. ERISA requires a third-party administrator (TPA) to
automatically provide to ERISA-plan participants a
summary plan description providing information on the
benefits available, the rights of participants and
beneficiaries in the plan, how benefits are obtained,
and the process for appealing denied benefits.
5. ERISA includes a preemption clause that provides states
are forbidden from enforcing laws relating to
private-sector employee health benefit plans but can
regulate "the business of insurance".
Existing state law:
1. Provides for the regulation of health insurers by the
Department of Insurance (CDI) and health plans by the
Department of Managed Health Care (DMHC).
2. Defines "administrator" as any person who collects any
charge or premium from, or who adjusts or settles claims
on, residents of this state in connection with life or
health insurance coverage and imposes specified
obligations pursuant to state law. (The term
"administrator" excludes an employer acting on behalf of
its employees or the employees of one or more subsidiary
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or affiliated corporations of that employer; a union on
behalf of its members and entities acting in various
other specified roles.)
3. Prohibits an administrator from acting as such without a
written agreement between the administrator and the
insurer, as specified.
4. Requires, pursuant to the written agreement in #2 above,
the payment to the administrator of any premiums or
charges for insurance by, or on behalf of, the insured
to be deemed to have been received by the insurer and
prohibits the payment of return premiums or claims by
the insurer to the administrator from being deemed
payment to the insured or claimant until such payments
are received by the insured or claimant.
5. Requires the administrator to maintain adequate books
and records of all transactions between it, and insurers
and insured persons, as specified.
6. Requires the Insurance Commissioner to have access to
the books and records of the administrator for the
purpose of examination, audit, and inspection.
7. Requires, where the services of an administrator are
utilized, the administrator to provide a written notice
approved by the insurer, to insured individuals,
advising them of the identity of and relationship among
the administrator, the policyholder or enrollee, and the
insurer.
8. Directs an administrator who collects funds to identify
and state separately in writing to the person paying to
the administrator any charge or premium for insurance
coverage the amount of any such charge or premium
specified by the insurer for such insurance coverage.
9. Requires, by regulation, dental insurance policies
regulated by CDI and dental-only specialized health
plans regulated by DMHC to disclose in the evidence of
coverage the address and telephone number provided
pursuant to the policy or plan to which complaints from
members are to be directed and a description of the
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policy or plan's grievance procedure.
This bill:
1. Directs the a TPA of a self-funded dental benefit plan
organized pursuant to ERISA to include in the
explanation of benefit document provided to plan
participants and also in forms sent to participants in
response to claims for benefits the following
disclosure:
"This dental plan is self-funded and subject to
compliance with the federal Employee Retirement Income
Security Act (ERISA). As such, it is not subject to
consumer protection provisions of state law governing
health care coverage for dental care. Any questions,
appeals, or disputes arising from the payment of a
submitted claim should be directed to the entity
providing the coverage, or to the United States
Department of Labor, Office of Participant Assistance.
You can contact the Office of Participant Assistance
at __________."
2. Specifies that this bill only applies to a TPA for a
self-funded dental benefit plan otherwise subject to the
jurisdiction of the federal government.
3. Specifies that the plan administrator shall insert in
the blank in the above disclosure the appropriate number
for the Office of Participant Assistance.
4. Makes a legislative finding that regulating TPAs
pursuant to this bill constitutes a regulation of
insurance within the meaning of the ERISA exemption from
preemption.
Background
While ERISA exempts the self-funded plan itself from state
law, TPAs are subject to CDI oversight. This bill will
revise the Insurance Code so California regulated TPAs
will be required to include in their explanations of
benefits a notice these plans are subject to regulation
under ERISA, along with appropriate contact information.
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Information provided by CDI in this bill's house of origin
indicates it is common for self-insured plans to turn over
the administration of the health plans to a TPA. The TPA
handles all administrative tasks including claims
processing and payments. Often the employer will contract
with an insurance company to act as a TPA for all health
care claims. In these circumstances, the insurer is not
subject to state laws and regulations. CDI indicates that
this bill applies to both TPAs that are required by CDI to
obtain a license to administer dental benefits for a
self-funded employer and a health insurer who is
functioning in an administrative services only capacity.
Health insurers with the administrative services only
designation and who hold certificates of authority to
transact health insurance are not required to have a
separate TPA license to act as a TPA.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 7/13/09)
California Dental Association (source)
OPPOSITION : (Verified 7/13/09)
Association of California Life and Health Insurance
Companies
ARGUMENTS IN SUPPORT : According to the California Dental
Association (CDA), the bill's sponsor, health benefit plans
in California are regulated by one of three agencies: the
DMHC, the CDI, or the United States Department of Labor in
the case of self-funded plans operating under the authority
of the federal ERISA law. State law requires TPAs
regulated by the state to include a disclosure on their
explanation of benefits documents concerning the state
agency that regulates the plan along with a contact number.
However, ERISA-regulated plans are not required to
disclose the fact of their regulation nor do they typically
provide a contact number of the federal regulatory agency,
thus making it difficult for patients or providers to know
whereto pursue assistance with disputes.
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The sponsor states that the public, providers and
regulatory bodies will be materially aided by the step of
including this information as part of a TPA's duty under
California law. As explained by the CDA, the mandate that
a California licensed TPA simply disclose to covered
persons and claimants that their plan and rights are
regulated by federal law, rather than by state law, will
result in pursuing any appeal on payment disputes along the
proper path and in the right forum, with the least waste of
effort, dollars and time.
The CDA states the current system of notification for those
plans regulated by ERISA is a source of inefficiency in
terms of directing patients toward the process of resolving
payment disputes. Immediate information provided on the
explanation of benefits as to whether or not the laws of
the state of California apply to that particular plan will
allow patients, providers, and regulators who receive calls
from patients, to determine quickly where the appeal rights
of the consumer reside. In short, this bill will save the
time of patients, dental office staff and state regulators
in determining the patients' path of appeal.
ARGUMENTS IN OPPOSITION : The Association of California
Life and Health Insurance Companies (ACLHIC) indicates it
understands the need to keep consumers informed but states
that most companies provide information to their employees
which explain that their dental plan is self-funded and
what the member's rights are regarding disputed claims
payments. ACLHIC states that because explanation of
benefit forms are usually prepared in a standard format
used across all states, forcing the explanation of benefits
to provide state-specific information will be very
burdensome and costly.
ASSEMBLY FLOOR :
AYES: Adams, Anderson, Arambula, Beall, Bill Berryhill,
Tom Berryhill, Blakeslee, Block, Blumenfield, Brownley,
Buchanan, Caballero, Charles Calderon, Carter, Chesbro,
Conway, Cook, Coto, Davis, De La Torre, De Leon, DeVore,
Duvall, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,
Fuller, Furutani, Galgiani, Garrick, Gilmore, Hagman,
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Harkey, Hayashi, Hernandez, Hill, Huber, Huffman,
Jeffries, Jones, Knight, Krekorian, Lieu, Logue, Bonnie
Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande,
Niello, Nielsen, John A. Perez, V. Manuel Perez,
Portantino, Price, Ruskin, Salas, Silva, Skinner,
Solorio, Audra Strickland, Swanson, Torlakson, Torres,
Torrico, Tran, Villines, Yamada
NO VOTE RECORDED: Ammiano, Fuentes, Gaines, Hall, Saldana,
Smyth, Bass
JJA:mw 7/13/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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