BILL ANALYSIS
AB 1521
Page 1
ASSEMBLY THIRD READING
AB 1521 (Jones)
As Amended April 29, 2009
Majority vote
HEALTH 10-6 INSURANCE 7-3
-----------------------------------------------------------------
|Ayes:|Jones, Ammiano, Block, |Ayes:|Coto, Charles Calderon, |
| |Carter, De La Torre, | |Carter, Feuer, Hayashi, |
| |De Leon, Hernandez, | |Nava, Torres |
| |Bonnie Lowenthal, Hill, | | |
| |Salas | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Adams, Conway, Emmerson, |Nays:|Garrick, Blakeslee, |
| |Gaines, Hayashi, Audra | |Niello |
| |Strickland | | |
| | | | |
-----------------------------------------------------------------
APPROPRIATIONS 11-4
-----------------------------------
|Ayes:|De Leon, Ammiano, Charles |
| |Calderon, Davis, Fuentes, |
| |Hall, John A. Perez, |
| |Price, Skinner, Solorio, |
| |Torlakson |
| | |
|-----+-----------------------------|
|Nays:|Nielsen, Duvall, Harkey, |
| |Audra Strickland |
| | |
-----------------------------------
SUMMARY : Prohibits a health plan or health insurer (health
plan) from entering into an agreement with a solicitor, broker,
agent, or any other entity (agent) engaging in the sale, offer
or application for an individual health plan contract or health
insurance policy (policy), that provides for or results in
variation of the agent's compensation because of the health
status, claims experience, industry, or occupation of the
individual. In addition, this bill imposes requirements on
health plans related to agent compensation at the time of
renewal of an individual policy and imposes specific disclosure
AB 1521
Page 2
requirements on agents. Specifically, this bill :
1)Prohibits a health plan from entering into an agreement with
an agent offering or selling an individual policy, that
provides for or results in variation of the agent's
compensation because of the health status, claims experience,
industry, or occupation of the individual, except for agent
compensation based on a percentage of premium, as long as the
compensation level does not vary because of the health status,
claims experience, industry, or occupation of the individual.
2)Prohibits a health plan from entering into a contract with an
agent for compensation that provides for a different
percentage of premium or compensation level, if at the time of
renewal of a policy, the agent submits an application that
results in the offer or purchase of a different policy with
the same health plan.
3)Requires an agent to notify an individual, at the time of
renewal of an individual policy, that application for a
different individual policy may result in a review of the
individual's medical history which could result in an offer,
or offer of a higher premium, or denial of the application
entirely. Specifies that application for a different policy
will not change the terms and conditions of the individual's
existing policy. Requires an agent to identify the specific
health plan or health plans the agent is offering.
AB 1521
Page 3
EXISTING LAW :
1)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.
2)Establishes the licensing category of a life licensee,
authorized to act on behalf of life or disability insurers,
and further defines one type of life licensee as an accident
and health insurance licensee, authorized to transact
insurance coverage for sickness, bodily injury, or accidental
death.
3)Prohibits health plans from directly or indirectly varying
agent compensation for health coverage sold to small employer
firms (2-50 employees) based on the health status, claims
experience, industry, occupation, or geographic area of the
small employer.
4)Under the federal Health Insurance Portability and
Accountability Act of 1996 (HIPAA), prohibits health insurers
from deflecting or in any way avoiding the issuance of a
policy to a HIPAA eligible person or a small employer group by
reducing agent compensation (commissions, bonuses, or other
rewards).
FISCAL EFFECT : According to the Assembly Appropriations
Committee, this bill has no direct fiscal impact to Department
of Managed Health Care and California Department of Insurance to
continue regulation of health plans and health insurers.
COMMENTS : According to the author, this bill would lend
transparency to the process of purchasing health insurance
through an agent. The author acknowledges that many individual
consumers and smaller businesses rely on insurance agents to
help them find the right health insurance coverage. However,
the author points out that, by contract, an insurance agent is
often acting on behalf of the insurer, not the purchaser, and is
paid by the insurer who ultimately sells the coverage. Many
agents represent multiple insurers, and the first duty of the
agent is to the insurers, not the purchaser.
Health Access California, sponsor of this bill, writes in
AB 1521
Page 4
support that insurance agent compensation is one major reason
why the overhead for individual insurance is almost 30% of the
premium, while major employers are estimated to pay overhead at
only 5%-7% of the premium. Supporters state that currently in
the individual health insurance market, it is advantageous for
both insurers and agents to churn business because the agent
gets a higher compensation for new business, and the insurer
gets the opportunity to conduct a new round of medical
underwriting for the new product. Healthier individuals, who
can pass underwriting, can move to a different, possibly cheaper
product, but those with claims history or pre-existing
conditions may be denied the chance to change. Individuals who
cannot switch policies must stay in coverage that costs them
more and more over time, because only high risk individuals stay
with that product. The sponsor argues this bill will improve
consumer disclosure and reduce any incentive for agents to churn
business, or to maneuver business based on health status to
specific insurers, by de-linking compensation from those
factors.
Analysis Prepared by : Deborah Kelch / HEALTH / (916) 319-2097
FN: 0000849