BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: AB 1449
A
AUTHOR: De Leon
B
AMENDED: As introduced
HEARING DATE: July 15, 2009
1
CONSULTANT:
4
Park/
4
9
SUBJECT
Health care coverage: solicitation
SUMMARY
Revises and makes specific to individual health care
coverage the duty established for agents, brokers,
solicitors, or sales representatives, who assist an
applicant in completing applications for health care
coverage, to assist applicants in providing answers to
health questions accurately and completely, as specified.
CHANGES TO EXISTING LAW
Existing law:
Existing law provides for the regulation of health plans by
the Department of Managed Health Care (DMHC) and for the
regulation of health insurers by the California Department
of Insurance (CDI).
Existing law requires anyone who solicits, negotiates, or
effects contracts of insurance to be licensed for that
purpose by the Commissioner of Insurance, and to meet
specified testing and training requirements.
Existing law establishes a duty on the part of agents,
Continued---
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brokers, or solicitors, who assist applicants in submitting
applications, to assist the applicant in providing answers
to health questions accurately and completely.
Existing law requires an agent, broker or solicitor to
attest to both of the following on a written application:
1) that to the best of his or her knowledge, the
information on the application is complete and accurate;
and, 2) that he or she explained to the applicant, in
easy-to-understand language, the risk to the applicant of
providing inaccurate information and the applicant
understood the explanation.
Existing law requires a declarant, who willfully states as
true any material fact he or she knows to be false in such
an attestation above, to be subject to a civil penalty of
up to $10,000, in addition to any applicable penalties or
remedies available under current law.
Existing law authorizes any public prosecutor to bring a
civil action to impose the civil penalty above and requires
a health plan or health insurance application to include a
statement advising declarants of the civil penalty
authorized under this bill.
This bill:
This bill would revise the duties related to assisting an
applicant above and the related attestation to apply only
when an agent, broker, solicitor or sales representative
assists an individual in completing an application for
individual health care coverage (plan contracts and
policies), rather than apply the duty to coverage
generally. Makes related technical changes.
FISCAL IMPACT
According to the Assembly Appropriations Committee, the
bill would have no direct fiscal impact to DMHC or CDI to
continue oversight of the individual health insurance
market.
BACKGROUND AND DISCUSSION
According to the author, this bill is needed to clarify
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that the duty established for health insurance agents to
help in completing health insurance applications accurately
is applicable to the individual health insurance market.
Legislative history
AB 2569 (De Leon), Chapter 604, Statutes of 2008, which
established the duty on health insurance agents revised
under this bill, related to the problem of health insurance
rescission. "Rescission" is the process whereby insurers
cancel individual health coverage on the basis of alleged
missing or incomplete information on the part of the
insured person at the time of application.
In addition to addressing other aspects of rescission, such
as protecting individuals in a contract or policy that was
rescinded, whose information was not related to the reasons
(justified or not) for rescission, AB 2569 focused on the
role of agents in helping individuals to complete the
application for health insurance to make sure that agents
did not contribute in any way to the potential for a
rescission because of errors or omissions in the
application.
In California, health plans and insurers may decline an
applicant that applies for health coverage in the
individual market because of health status or claims
experience. In the small group market, however, individuals
are not allowed to be declined or excluded from the group
for such reasons.
Related legislation
AB 1521 (Jones) would prohibit a health plan or health
insurer from basing agent or broker compensation on the
health status of the individual seeking individual health
coverage, as specified. Imposes requirements on health
plans/insurers related to agent/broker compensation at the
time of renewal of an individual contract/policy or switch
to another contract/policy with the same plan or insurer.
Imposes specific disclosure requirements on agents.
Pending in the Senate Appropriations Committee.
Prior legislation
AB 2569 (De Leon), Chapter 604, Statutes of 2008, requires
health plans and health insurers to offer new coverage, or
continue existing coverage, for any individual whose
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coverage was rescinded, other than the individual whose
information led to the rescission, within 60 days, without
medical underwriting, as defined. Establishes a duty for
agents to assist applicants in providing accurate and
complete answers to health questions.
Arguments in support
The California Medical Association writes that it would
support this bill, if the bill were amended to provide
whistleblower protection if a declarant reports a violation
by an agent or sales representative, and require the
disclosure in existing law to be prominently displayed on
the application.
PRIOR ACTIONS
Assembly Floor: 73-0
Assembly Appropriations:16-0
Assembly Health: 19-0
COMMENTS
1.Technical amendment. Pursuant to SB 1379, Chapter 607,
Statutes of 2008, which established the Managed Care
Administrative Fines and Penalties Fund to capture fines
and penalties related to violations of the Knox-Keene Act
(which governs health plans regulated by DMHC), staff
recommends the following technical amendment:
Page 2, lines 20-26:
(c) If, in an attestation required by subdivision (b),
a declarant
willfully states as true any material fact he or she
knows to be
false, that person shall, in addition to any
applicable penalties or
remedies available under current law, be subject to a
civil penalty
of up to ten thousand dollars ($10,000). Any public
prosecutor
may bring a civil action to impose that civil penalty.
These
penalties shall be paid to the Managed Care
Administrative Fines
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and Penalties Fund.
POSITIONS
Support: California Alliance for Retired Americans
California Medical Association (support, if
amended)
Oppose: None received
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