BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
AB 2470 (De La Torre)
As Amended June 16, 2010
Hearing Date: June 29, 2010
Fiscal: Yes
Urgency: Yes
KB:jd
SUBJECT
Individual Health Care Coverage
DESCRIPTION
This bill, sponsored by the California Medical Association,
would impose specific requirements and standards on health care
service plans licensed by the Department of Managed Health Care
(DMHC) and health insurers subject to regulation by the
California Department of Insurance (CDI), (collectively
carriers) related to a carrier's decision to cancel or rescind
an individual's health care coverage.
BACKGROUND
The individual health insurance market, which covers about nine
percent of insured Californians or seven percent of non-elderly
Californians, is made up of individuals and families who pay for
their own coverage, generally because group coverage is not
available or they are ineligible for publicly subsidized health
coverage. Persons often seek this type of coverage because they
are self-employed, early retirees, part-time employees, or have
"aged off" a parent's policy.
In California, health plans and insurers conduct medical
underwriting, the process of reviewing an applicant or
applicants' medical history to ascertain the financial risk
posed by the applicant or applicants. Each health plan has its
own underwriting guidelines in the individual market, which must
be filed with the California Department of Managed Health Care
(DMHC), but are not publicly disclosed. Health plans and health
insurers in the individual market may deny an applicant health
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insurance, limit a benefit package, or charge a higher premium,
based on the assessed level of risk. The plan or insurer may
also use a pre-existing condition provision or a waivered
condition provision to exclude coverage for up to 12 months,
subject to specified rules.
Rescission involves a determination by the health plan or health
insurer that the contract between the plan or insurer and
enrollee, subscriber, or policyholder never existed because of a
misrepresentation by the enrollee, subscriber, or policyholder
at the time of application, and that, therefore, any health care
services the enrollee, subscriber, or policyholder received
during the entire time of the contract are the responsibility of
the enrollee, subscriber, or policyholder. As a remedy,
rescission essentially places the parties back to their original
status prior to the execution of the contract, with premiums
refunded to the enrollee, and any health services paid for by
the plan owed by the enrollee.
Currently, different statutory provisions apply to health plans
under DMHC and health insurers under CDI, related to rescission.
Both statutory provisions prohibit post-claims underwriting,
defined as rescinding, canceling, or limiting 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, existing law provides that the prohibition against
post-claims underwriting does not limit a plan's remedies upon a
showing of willful misrepresentation. The Insurance Code does
not have a parallel provision regarding willful
misrepresentation. A recent Court of Appeal opinion (see Hailey
below), issued in December 2007, interprets the post-claims
underwriting statute and a plan's right to rescission.
In 2007, DMHC initiated a non-routine investigation of the five
largest Knox-Keene plans related to rescissions of health
coverage. The DMHC investigation found the following:
-------------------------
| Number of Coverage |
| Rescissions |
| Five Largest Knox-Keene |
| Plans |
-------------------------
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|-----------+-------------|
|2002 |882 |
|-----------+-------------|
|2003 |743 |
|-----------+-------------|
|2004 |1,436 |
|-----------+-------------|
|2005 |1,536 |
|-----------+-------------|
|2006 |302 |
-------------------------
-------------------------
|Source: |
|DMHC |
-------------------------
DMHC has taken an aggressive enforcement stance with respect to
rescissions, and in 2008, DMHC reached agreements with Anthem
Blue Cross, Blue Shield, Health Net, Kaiser, and PacifiCare
requiring them to pay fines ranging from $50,000 to $10 million,
with additional fines to be levied if corrective action plans
for rescission policies and practices going forward are not
submitted by the health plans, approved by DMHC and properly
implemented. The settlements require the plans to offer health
care coverage to former members whose policies they rescinded or
canceled over the past four years, regardless of the former
member's health condition, and to reimburse the affected
consumers for out-of-pocket costs incurred after the policies
were rescinded. DMHC ordered the plans to use a fair outside
arbiter selected by the DMHC to review every rescission
uncovered in the investigations and determine remedies, such as
payment of medical care and premiums. Reimbursement for health
care services will be limited to those who are found by the
arbiter to have been wrongly rescinded. According to DMHC, by
the end of February 2009, of the 3,300 enrollees who were
identified as having coverage rescinded and required to be
reinstated under the settlements, all had been offered coverage.
Of those offered reinstatement, 170 had re-started coverage (5
percent) and 293 (8 percent) have requested reimbursement under
the terms of the settlement. DMHC is reportedly in the process
of reviewing and finalizing the health plan corrective action
plans related to rescission policies and practices going
forward.
In late 2008 and early 2009, CDI reached agreements with Anthem
Blue Cross, Blue Shield, and Health Net related to the insurers'
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rescission of health insurance products subject to CDI's
jurisdiction. As part of the CDI settlements, insurers agreed
to offer coverage to consumers whose individual, family, or
short-term health policies were previously terminated without
subjecting them to medical underwriting or exclusions for
pre-existing conditions, and to pay any medical expenses that
would have been covered under the rescinded policies if those
costs had not already been covered by another source. The CDI
agreements do not allow the insurers to use the validity of the
rescission as a defense to any claim for reimbursement of
medical expenses. In the CDI settlements, insurers agreed to an
expedited independent arbitration process to resolve any
disputes regarding the reimbursements for medical expenses, such
as coverage issues or medical necessity determinations. As part
of the settlements with CDI, insurers also agreed to make
changes to the application forms, underwriting process, agent
and broker training, and notification to consumers and providers
of an investigation regarding information in the application and
oversight of its claims handling. Insurers also agreed to
establish an independent third-party review process for
rescissions going forward.
Under the agreements with both DMHC and CDI, rescinded patients
can accept new coverage without forfeiting any legal rights, but
they must execute a release of any and all rescission-related
claims against plans or insurers in order to receive
reimbursement for out-of-pocket medical expenses.
In addition to the settlements with regulators, the Los Angeles
City Attorney has separately sued several insurers within the
city's boundaries. There have also been multiple individual and
class action lawsuits brought against insurers by individuals
and families who argue that their policies were improperly
rescinded or canceled.
The recently enacted federal Patient Protection and Affordable
Care Act (Public Law 111-148) (PPACA) established a national
standard on rescission. As part of the federal PPACA, health
plans or insurers are prohibited from rescinding a plan or
coverage once the enrollee is covered, except that federal law
allows rescission when an individual has performed an act or
practice that constitutes fraud, or makes an intentional
misrepresentation of material fact that is prohibited by the
terms of the plan or coverage.
This bill seeks to, among other things, codify a standard for
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rescinding health plans or insurance policies that is consistent
with the PPACA, and provide for an independent review of any
decisions by insurers to cancel coverage for individuals.
This bill was approved by the Senate Health Committee on a 5-0
vote.
CHANGES TO EXISTING LAW
Existing federal law , the Patient Protection and Affordable Care
Act (Public Law 111-148) (PPACA), requires each health insurance
issuer that offers health insurance coverage in the individual
or group market to accept every employer and individual that
applies for such coverage, beginning January 1, 2014.
Existing federal law prohibits health plans and health insurers
offering group or individual coverage from rescinding a plan or
coverage once the enrollee is covered under a plan or coverage,
except when an individual has performed an act or practice that
constitutes fraud, or makes an intentional misrepresentation of
material fact, as prohibited by the terms of the plan or
coverage. Existing federal law also prohibits coverage from
being cancelled, except with prior notice to the enrollee, and
only as permitted under specified provisions of federal law.
These provisions take effect six months following the date of
enactment of PPACA (six months after March 23, 2010). (Public
Law 111-148)
Existing law provides for regulation of health plans by DMHC
under the Knox-Keene Health Care Service Plan Act of 1975
(Knox-Keene) and for regulation of health insurers by the CDI
under the Insurance Code.
Existing law prohibits health plans and health insurers from
engaging in "post-claims underwriting," defined to mean the
rescinding, canceling, or limiting of a plan contract or
insurance policy due to the plan's or insurer's failure to
complete medical underwriting and resolve all reasonable
questions relative to an application for coverage before issuing
the health plan contract or policy. (Health & Saf. Code Sec.
1389.3.) For health plans regulated by DMHC, existing law
provides that the prohibition against post-claims underwriting
does not limit a health plan's remedies upon a showing of
willful misrepresentation. (Health & Saf. Code Sec. 1389.3.)
Existing law prohibits a health plan and health insurer from
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rescinding a contract or policy for any reason after 24 months
following the issuance of an individual contract or policy.
Existing law further provides that, after 24 months, health
plans and insurers are prohibited from canceling a contract or
policy, limiting any of the provisions of a contract/policy, or
raising premiums on a contract/policy specifically due to any
omissions, misrepresentations, or inaccuracies in the
application form, whether willful or not. (Health & Saf. Code
Sec. 1389.21.)
Existing law prohibits health plans and health insurers from
rescinding or modifying an authorization for services after the
service is rendered, for any reason, including but not limited
to, the plan's subsequent rescission, cancellation, or
modification of the enrollee or insured's contract, or the plan
or insurer's subsequent determination that the health plan or
health insurer did not make an accurate determination of the
enrollee or insured's eligibility. (Health & Saf. Code Sec.
1371.8.)
Existing law establishes an independent medical review (IMR)
system, as specified, and requires health plan contracts and
health insurance policies to provide an enrollee or insured with
the opportunity to seek an IMR whenever health care services
have been denied, modified, or delayed by the plan, or by one of
its contracting providers, based in whole or in part on a
finding that the proposed health care services are not medically
necessary. (Health & Saf. Code Sec. 1374.30.)
Existing law requires DMHC and CDI to contract with one or more
IMR organizations, and establishes specific conflict of interest
rules and disclosure requirements applicable to the external
review organizations. (Health & Saf. Code Sec. 1374.32.)
This bill would prohibit a carrier from rescinding or canceling
a health plan contract or health insurance policy because of
misrepresentation once a plan or insurer has issued an
individual contract or policy, unless all of the following
apply: (1) there was a material misrepresentation or material
omission in the information submitted by the applicant in the
written application to the health plan or insurer prior to the
issuance of the contract or policy that would have otherwise
prevented the contract or policy from being entered into; (2)
the carrier demonstrates that the applicant intentionally
misrepresented or intentionally omitted material information on
the application prior to the issuance of the contract or policy
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with the purpose of misrepresenting his or her health history in
order to obtain health care coverage; and (3) the health plan or
insurer sent a copy of the completed written application to the
applicant with a copy of the contract or policy issued, along
with a specified written notice.
This bill would require health plans and insurers to send a copy
of the completed written application to the applicant with a
copy of the plan contract or policy, along with a notice that
states all of the following: (1) the applicant should review the
completed application carefully and notify the health
plan/insurer within 14 days of any inaccuracy in the
application; (2) any intentional material misrepresentation or
intentional material omission in the information submitted in
the application may result in the cancellation or rescission of
the plan contract; and (3) the applicant should retain a copy of
the completed written application for the applicant's records.
This bill would specify that, notwithstanding the prohibition
above, coverage may be canceled or not renewed for failure to
pay the premium as provided in existing law.
This bill would authorize carriers to conduct a "postcontract
investigation," if the carrier obtains information indicating
that a covered person may have intentionally misrepresented or
intentionally omitted information on the application, and
requires carriers to send a specified notice within five days to
the covered person that the investigation may lead to rescission
or cancellation of the covered person's coverage.
This bill would establish specific timelines and notice
requirements related to the postcontract investigation, and any
subsequent cancellation or rescission that results, including
specific and detailed information that must be included in
notices provided to covered persons under the contracts or
policies that are the subject of a "postissuance investigation,"
including:
a) An opportunity for the covered person to provide any
evidence or information within 30 business days to negate
the carrier's reasons for initiating the investigation;
b) A requirement that the carrier complete the
investigation within 90 days of the notice;
c) A written notice via regular and certified mail to the
covered person, once the investigation is complete, with
one of the following determinations:
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i) The carrier has determined that the covered person
did not intentionally misrepresent or intentionally omit
material information during the application process and
that the covered person's health care coverage will not
be canceled or rescinded; or
ii) The carrier intends to seek approval from the
director of DMHC or the CDI commissioner to cancel or
rescind the covered person's coverage for intentional
misrepresentation or intentional omission of material
information during the application for coverage process.
This bill would require the written notice described above to
include specified information including notice that any decision
to cancel or rescind the covered person's coverage will not
become effective until the independent review organization
established by this bill upholds the decision, unless the
covered person opts out of the independent review.
This bill would require carriers to continue to authorize and
provide all medically necessary services until the effective
date of a cancellation or rescission, and would provide that the
effective date of a cancellation or rescission is no earlier
than the date of certified notice to the covered person that the
independent review organization has made a determination
upholding the decision to cancel or rescind.
This bill would, commencing March 31, 2011, establish within
DMHC and CDI an independent review process (IRP) for decisions
to cancel or rescind individual health plan contracts or
individual health insurance policies and requires that all
carrier decisions to cancel or rescind be reviewed in the IRP,
unless the covered person opts-out of the process.
This bill would authorize a covered person to designate an agent
to act on his or her behalf and to submit relevant information
30 days from the date of the independent review organization's
(IRO) receipt of request for an independent review.
This bill would require carriers to include a disclosure of the
right to an automatic IRP in member handbooks, evidence of
coverage, and other related materials on or before January 1,
2012, as specified.
This bill would require submission of specified materials by the
carrier to the independent review organization (IRO) designated
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by the regulator, according to specified timelines, including a
copy of all information submitted to the covered person and any
information the covered person submitted to the carrier,
relating to the carrier's decision to rescind or cancel
coverage, while maintaining the confidentiality of the covered
person's medical information. This bill would require the
carrier to provide a copy of all documents submitted to the IRO
to the covered person, as well as other materials.
This bill would require DMHC and CDI to expeditiously review IRP
requests and notify covered persons related to their rights and
responsibilities in the IRP process, related to any proposed
cancellation or rescission, including the right of the covered
person to submit relevant information within 30 days.
This bill would require DMHC and CDI to, by March 31, 2011,
contract or otherwise arrange for one or more independent
not-for-profit organizations to conduct IRPs. The review
organizations must be independent of carriers doing business in
California and meet the specific conflict of interest standards
established by the director of DMHC and the commissioner of CDI
through regulations. This bill would require that these
conflict of interest standards be consistent with existing
conflict of interest provisions for the Independent Medical
Reviews conducted under existing law by DMHC and CDI, to the
extent applicable.
This bill would require contract provisions between DMHC or CDI
and the IRO to include specific quality assurance mechanisms,
conflict of interest provisions, and protections to ensure the
selection of independent, qualified arbitrators.
This bill would require the IRO to, among other things,
demonstrate that it has a quality insurance mechanism, as
specified, and ensure that arbitrators selected by the IRO meet
minimum requirements, as specified, including that the
arbitrator must hold an unrestricted license to practice law in
California.
This bill would require the arbitrator to follow specified
processes and timelines, and would allow the arbitrator to
request opinion of an expert consultant, as defined; but would
prohibit the expert consultant requested by an arbitrator from
rendering an opinion as to whether the covered person
intentionally misrepresented or intentionally omitted
information during the application process. This bill would
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require that the IRO complete its review and make a
determination in writing within 60 days of the receipt of the
application for review and supporting documentation.
This bill would require that DMHC and CDI immediately adopt the
IRP determination and promptly issue a written decision to the
parties that shall be binding on the carrier.
This bill would require the regulator to provide, upon request
of any interested person, a copy of all nonproprietary
information filed with the regulator by an IRO, at a nominal fee
for photocopying; and make available to the public, upon request
and at the department's cost, the determination of the IRO that
the regulator has adopted, redacting necessary information to
comply with privacy and confidentiality laws and those governing
disclosure of public records. This bill would require the
regulator to perform an annual audit of independent review
cases.
This bill would provide that the IRP is in addition to any other
procedures or remedies that may be available.
This bill would prohibit carriers from engaging in conduct to
prolong the IRP, subject to a specific administrative penalty of
$5,000 for each day the IRP is prolonged or an IRP decision is
not implemented, as specified.
This bill would impose a per case assessment on carriers to
support the costs of the IRP, but exempts carriers that do not
cancel or rescind contracts from the fees and assessments
established.
This bill would, on and after January 1, 2011, require carriers
to report the number of individual contracts and policies issued
and the number where the carrier initiated a cancellation or
rescission, and requires DMHC and CDI to annually post the
information on the respective department Internet Web sites.
This bill would exempt from the provisions of this bill plan
contracts or health insurance policies for coverage issued under
Medi-Cal, Access for Infants and Mothers Program, the Healthy
Families Program, and the federal Medicare Program.
This bill would declare that it is to take effect immediately as
an urgency statute in order to protect consumers from rescission
and cancellations that would violate this bill at the earliest
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possible time.
COMMENT
1. Stated need for the bill
According to the author, this bill protects consumers from
having their health insurance coverage canceled or rescinded
when they need care by maintaining their current coverage while
allowing regulators to independently analyze and adjudicate on
any rescission or cancellation of a policy due to
misrepresentation. The author argues the time has come to
provide individuals with an unbiased analysis on whether their
policy should be rescinded or cancelled, and to provide the
utmost protection to patients whenever their health plans and
insurers want to rescind their health coverage.
The sponsor of this measure, CMA, further writes that this bill
will provide an independent review of any decisions by health
insurers to cancel or rescind coverage for sick patients, which
it states is a vital safeguard to ensure the federal ban on the
unscrupulous practice of rescission is followed. CMA asserts
that it is important for California to implement a robust
enforcement mechanism, to police health insurers and ensure
strong and independent implementation. CMA further states that
this bill will ensure that health plans and insurers do not act
as "judge and jury," whenever they want to rescind or cancel a
policy for misrepresentation, thereby protecting innocent
patients from having their coverage illegally rescinded.
2. Bill would codify the federal standard for rescission
In Hailey v. California Physicians' Service (2007) 158
Cal.App.4th 452, the Court of Appeals held that Health and
Safety Code Section 1389.3, the post-claims underwriting
statute, precludes a health care services plan from rescinding a
contract for material misrepresentation or omission unless the
plan can demonstrate the misrepresentation or omission was
willful, or it had made reasonable efforts to ensure the
subscriber's application was accurate and complete as part of
the pre-contract underwriting process. However, the Hailey
decision failed to articulate what constitutes "reasonable
efforts" to ensure that an application is accurate and complete
as part of the pre-contract underwriting process or what
constitutes resolution of all reasonable questions arising from
written information, as the statutory prohibition on post-claims
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underwriting requires.
Blue Shield appealed the decision to the California Supreme
Court, which refused to hear the case, effectively making the
interpretation of the post-claims underwriting statute in the
Hailey decision the applicable law relating to rescission under
Knox-Keene. Thereafter the case returned to Orange County
Superior where, on May 28, 2009, a judge ruled that Blue Shield
had acted properly, after the Haileys stipulated that they had
lied about Steve Hailey's preexisting condition to obtain
coverage.
The Hailey decision seemingly allowed a health plan to rescind
on a standard less than willful misrepresentation, and created
ambiguity as to what constitutes a legal rescission under
Section 1389.3. Health plans and insurers could argue (and
reportedly did) that they were allowed to rescind so long as
they conducted "reasonable efforts" to ensure that the
application was accurate and complete. This standard is much
lower than the "willful representation" and raised serious
concerns for patients.
After the Hailey decision, there were a number of legislative
efforts to codify the higher standard of "willful
misrepresentation" for rescissions of individual health care
coverage, but these measures were repeatedly vetoed by the
Governor. In his veto message to the most recent of these
measures, AB 2 (De La Torre, 2009), the Governor stated:
I have repeatedly indicated I would support a bill that
provides strong statutory protections for consumers against
inappropriate rescissions by health plans. However, this bill
continues to have a provision that benefits trial lawyers
rather than consumers. I remain comfortable sending this bill
back for a second time without my signature because of the
strong consumer protections the Department of Managed Health
Care and Department of Insurance have successfully implemented
over the past two years. The number of rescissions
industry-wide has decreased significantly since 2005. Millions
of dollars have been assessed against health plans and
insurers; corrective action plans have been received and
approved; revised consumer disclosures have been reviewed for
literacy, consistency and compliance with the settlement
agreements; and lastly, the two departments are working
together to ensure that all health plans meet the same
standards of fairness and full disclosure. The market has
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changed and it is because of my Administration's strong action
in this area.
The precedent-setting 4th District Court of Appeals decision
in Hailey v. Blue Shield relied heavily on the Department of
Managed Health Care's amicus brief. The court's reliance on
this brief speaks to the strong work of the Department and the
balance required when enacting consumer protections and
ensuring access to the individual health plan market. I have
no interest in overturning that appellate decision and the
definitive interpretation of the postclaims underwriting
statute.
In addition, I have signed targeted measures that prohibit
plans from financially incentivizing their employees to
rescind or cancel policies; require plans to offer coverage to
families when the individual on the contract has been
rescinded or cancelled; and most recently, I have signed
Assembly Bill 108 that will prohibit a health plan from
rescinding or canceling a contract after 24 months.
I would request that the Legislature send me a bill that
codifies the Hailey decision, as I have asked for since 2008.
When that occurs, I will be happy to sign that bill.
The recently enacted federal health care reform bill (PPACA)
established a national standard on rescission, which prohibits
carriers from rescinding a plan or coverage once the enrollee is
covered, except in instances where the individual has performed
an act or practice that constitutes fraud, or makes an
intentional misrepresentation of material fact that is
prohibited by the terms of the plan or coverage. The PPACA does
not permit, as the Hailey ruling did, carriers to rescind a
policy if it had made reasonable efforts to ensure the
subscriber's application was accurate and complete as part of
the pre-contract underwriting process. This bill would codify a
standard for rescission and cancellation that generally mirrors
the standard for rescission in the PPACA.
3. Postcontract issuance investigation
This bill would authorize a carrier to initiate a "postcontract
issuance investigation" in order to determine whether a person's
plan contract or insurance policy should be rescinded or
canceled if the carrier obtains information that indicates the
person may have intentionally omitted or intentionally
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misrepresented information during the application process.
Carriers would have to provide written notice to the enrollee or
insured within five days of initiating the investigation. The
written notice must include disclosure of the alleged omission
or misrepresentation, and a concise explanation of why the
information has resulted in an investigation to determine
whether the contract or insurance policy should be rescinded or
cancelled.
An individual would have 30 business days to provide any
evidence or information negating the carrier's reasons for
initiating the investigation. A carrier would be required to
complete investigations in 90 days, at which point the carrier
would have to notify the enrollee or insured whether it intends
to seek approval from DMHC or CDI to cancel or rescind the
contract or policy. The notice would have to include the
reasons for the carrier's determinations and a statement that
the decision is not final until it is reviewed and approved by
the independent review process described below. The notice must
also provide the enrollee or insured with information regarding
the independent review process, and the right to opt out of the
process within 30 days.
4. Independent review process
This bill would, commencing March 31, 2011, establish an
independent review process for the review of carriers' decisions
to cancel or rescind health care plans or insurance policies.
All carrier decisions to rescind or cancel would have to be
reviewed, unless an individual chooses to opt out of the
process. Carriers would be required to submit all relevant
documents and information to the independent review
organization.
This bill would require the DMHC and CDI to contract with one or
more independent organizations in the state to conduct the
reviews. The organization must be not-for-profit and
independent of any health care service plan or insurer doing
business in the state. The organization must also meet the
conflict-of-interest requirements established by the DMHC and
CDI, which must be consistent with existing standards governing
independent medical review organizations. The independent
review organization would have to demonstrate that it has a
quality assurance mechanism ensuring that all reviews are
timely, clear, and credible, and that arbitrators are fair and
impartial, as well as licensed as attorneys and in good standing
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with the State Bar. All medical records and review materials
must be kept confidential in accordance with state law.
An arbitrator selected to conduct a review by the independent
review organization would promptly review all pertinent records
submitted to the organization. If an arbitrator requests
information from one party, the response shall be provided to
all parties. The arbitrator may request an opinion of an expert
consultant with respect to specific questions raised during the
review, but the expert consultant may not render an opinion as
to whether the enrollee or insured intentionally misrepresented
or intentionally omitted information during the application
process. The review must be completed within 60 days of the
organization's receipt of the request. The arbitrator's
analysis and determination must state the reasons for the
determination, the relevant documents in the record, and the
relevant findings supporting the determination. The DMHC and
CDI would be required to immediately adopt the determination of
the independent review organization and issue a written decision
to the parties that shall be binding on the plan or insurer.
The independent review would not limit the enrollee or insured's
rights to pursue any other remedies under the law.
This bill would require the DMHC and CDI to establish a
reasonable, per-case reimbursement schedule to support the costs
of the independent review process, and would require the costs
to be borne by "affected" carriers through an assessment.
However, this bill would exempt carriers that do not cancel or
rescind contracts from the fees and assessments established.
The independent review process established by AB 2470 is
comprehensive and provides for the establishment of conflict of
interest standards, allows for patients to participate or opt
out of the independent review process, and establishes a clear
standard for rescission that all review organizations would be
required to utilize. These provisions appear to reduce the
probability of undue influence in the independent review process
and ensure that the patient is not shut out of the process.
They are also consistent with the independent review process
contained in AB 2 (De La Torre, 2009), which was previously
approved by this committee.
5. Penalties for prolonging review process
The bill would impose administrative penalties on health plans
or insurers for engaging in conduct that prolongs the
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independent review process or for failing to promptly implement
an independent review process decision. The penalties would be
no less than $5,000 for each day the process is prolonged or the
decision is not implemented. The penalties would be in addition
to any other fines, penalties, or remedies available to the DMHC
or CDI. These penalties would be deposited in the Managed Care
Administrative Fines and Penalties Fund. This bill would
specify that penalties deposited in the fund shall not be used
to lower health care service plans' assessments used to fund the
department.
6. Opposition
Health plans and insurers write in opposition that this bill
would require them to change their underwriting processes in
2012 and again in 2014 in response to federal health care
reform. The California Association of Health Plans (CAHP)
writes that the independent third party process for review of
rescissions could be shortened, and CAHP seeks to have the
provisions of this bill dealing with cancellations deleted from
the bill. The Civil Justice Association of California writes in
opposition that having the independent review organization
determine whether a health plan enrollee "intentionally
misrepresented" material information makes the review process
impotent and moot, because an administrative body that reviews
only documents and does not take testimony and ask questions is
incapable of determining the state of mind of the person whose
application it is reviewing and will result in rescission
approval decisions ending up in court.
Support : Alzheimer's Association; American Federation of State,
County and Municipal Employees, AFL-CIO; Association of Northern
California Oncologists; California Academy of Physician
Assistants; California Communities United Institute; California
Psychiatric Association; California Psychological Association;
California Society for Anesthesiologists; City Attorney, City of
Los Angeles; Consumer Attorneys of California; Latino Coalition
for a Healthy California; Osteopathic Physicians & Surgeons of
California
Opposition : Anthem Blue Cross; Association of California Life &
Health Insurance Companies; California Association of Health
Plans; Civil Justice Association of California
HISTORY
AB 2470 (De La Torre)
Page 17 of ?
Source : California Medical Association
Related Pending Legislation : AB 2540 (De La Torre) would add
postclaims underwriting, the practice of health insurers waiting
for health claims to be submitted and then canceling insurance
coverage retroactively, to the definition of unfair methods of
competition in the business of health insurance. This bill is
currently in the Senate Appropriations Committee.
Prior Legislation :
AB 1945 (De La Torre, 2008) and AB 2 (De La Torre, 2009)
contained similar provisions to this bill with respect to the
standard for rescission and an independent review process. Both
of these bills were vetoed.
AB 108 (Hayashi, Chapter 406, Statutes of 2009) prohibits health
plans and health insurers, after 24 months from the issuance of
an individual health plan contract or health insurance policy,
from rescinding the individual coverage for any reason, and
prohibits canceling, limiting, or raising premiums in a contract
or policy due to any omissions, misrepresentations, or
inaccuracies in the application form, whether willful or not.
AB 1150 (Lieu, Chapter 188, Statutes of 2008) prohibits a health
plan or insurer from compensating any person retained, employed,
or contracted with, to review medical underwriting decisions
based on, or related to, the number of contracts, policies, or
certificates, or on the cost of services for a contract, policy,
or certificate, that the person has caused or recommended to be
rescinded, canceled, or limited, or the resulting cost savings
to the plan or insurer.
AB 2549 (Hayashi, 2008) would have prohibited health plans and
health insurers from rescinding a health plan contract or health
insurance policy after six months from the time the contract is
effective for any reason. AB 2549 was held in the Senate
Appropriations Committee.
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 coverage was
rescinded, other than the individual whose information led to
the rescission, within 60 days, without medical underwriting, as
defined.
AB 2470 (De La Torre)
Page 18 of ?
ABX1 1 (Nunez, 2007) would have enacted comprehensive health
care system reforms, including coverage expansions, an employer
spending requirement and individual health insurance mandate,
affordability protections, insurance market reforms, cost
containment elements and provisions to support health care
safety net providers. Among other market reform elements, ABX1
1 prohibited carriers from setting performance goals or quotas
or providing additional compensation based on the number of
people whose coverage was rescinded, or the financial savings of
the plan associated with the rescission of coverage. ABX1 1
failed passage in the Senate Health Committee.
AB 1324 (De La Torre, Chapter 602, Statutes of 2007), clarifies
and makes specific provisions of law that currently prohibit
health plans and health insurers, where the plan or insurer
authorizes a specific type of treatment by a health care
provider, from rescinding or modifying the authorization after
the provider renders the health care service in good faith and
pursuant to the authorization.
AB 1100 (Brown, Chapter 1210, Statutes of 1993) enacted the
Health Insurance Access and Equity Act which requires
applications for health plan contracts or health insurance
policies to conform to certain standards for underwriting,
including clear and unambiguous questions when health-related
questions are used to ascertain an applicant's health, and
prohibits postclaims underwriting.
Prior Vote :
Assembly Health Committee (Ayes 13, Noes 5)
Assembly Appropriations Committee (Ayes 12, Noes 5)
Assembly Floor (Ayes 46, Noes 27)
Senate Health Committee (Ayes 5, Noes 0)
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