BILL ANALYSIS
AB 2470
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CONCURRENCE IN SENATE AMENDMENTS
AB 2470 (De La Torre)
As Amended August 27, 2010
Majority vote
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|ASSEMBLY: | |(June 2, 2010) |SENATE: |24-10|(August 30, |
| | | | | |2010) |
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(vote not relevant)
Original Committee Reference: HEALTH
SUMMARY : Prohibits health plans and insurers from rescinding or
canceling coverage, except under specified circumstances.
Modifies the ability of a health plan or health insurer to cancel
or not renew a contract or policy for nonpayment of premiums by
requiring a 30-day grace period from the date of notification from
the plan or insurer.
The Senate amendments delete the Assembly version of this bill,
and instead:
1)Modify the ability of a health plan or health insurer to cancel
or not renew a contract or policy for nonpayment of premiums by
requiring a 30-day grace period from the date of notification
from the plan or insurer. Require the 30-day grace period to be
longer if required under federal health care reform and any
subsequent rules or regulations. Require a health plan and
insurer to continue to provide coverage during this time period.
2)Permit a health plan to cancel or not renew coverage offered to
employers if an individual or employer ceases to be a member of
a guaranteed association, but only if that coverage is
terminated uniformly without regard to any health status-related
factor relating to any subscriber.
3)Permit an insurer to cancel or not renew coverage if the
coverage is:
a) Offered through a network plan and there is no longer any
covered individual in connection with the plan who lives,
resides, or works in the service area of the disability
insurer; or,
b) Made available in the individual market through a bona
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fide association and the membership of the individual in the
association ceases, but only if that coverage is terminated
uniformly without regard to any health status-related factor
of covered individuals.
4)Require a health plan, after receipt of the order from its
regulator, to either request a hearing or reinstate the
individual.
5)Require, if an individual requests a review of the health plan
or insurer's determination to cancel, rescind or not renew a
contract or policy, the health plan or insurer to continue to
provide coverage to the enrollee or subscriber under the terms
of the contract until a final determination of the enrollee's or
subscriber's request for review has been made by its regulator.
Exempt this provision when a health plan or insurer cancels or
does not renew a contract or policy for nonpayment of premiums.
Require a health plan and health insurer to reimburse the
enrollee or subscriber for any expenses incurred within 30 days
of receipt of the completed claim.
6)Permit the regulators to issue guidance to health plans and
health insurers regarding compliance with the above provisions,
and exempts that guidance from the Administrative Procedure Act
(APA). Make any guidance issued effective through December 31,
2013, or until the regulator adopts and effects regulations
pursuant to the APA, whichever occurs first.
7)Modify the timeframe, from 72 hours to 72 hours or shorter if
required under federal law, for a health plan or insurer to
approve, modify, or deny requests by providers when an
enrollee's condition is such that the enrollee faces an imminent
and serious threat to his or her health.
8)Require, for grievances involving the cancellation, rescission
or non-renewal of a contract or policy, the health plan or
health insurer to continue to provide coverage under the terms
of the contract until a final determination of the review has
been made by the health plan/insurer or its regulator. Exempt
this provision if the health plan or health insurer cancels or
fails to renew the contract for nonpayment of premiums.
9)Allow health plan subscribers and enrollees to submit grievances
involving cancellations, rescissions or the non-renewal of plan
contracts directly to the Department of Managed Health Care
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(DMHC) without being required to participate in the health
plan's grievance process for at least 30 days.
10)Require, to the extent required by a specified provision of
federal health care reform and any subsequent rules or
regulations, there to be an independent external review of a
health plan or health insurer's cancellation, rescission or
non-renewal of an individual's coverage pursuant to the
standards required by the United States Secretary of Health and
Human Services.
11)Conform the health insurance provisions of this bill with the
changes made to the health plan requirements made by this bill.
AS PASSED BY THE ASSEMBLY , this bill imposed 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) related to the application forms, medical underwriting, and
notice and disclosure of rights and responsibilities for
individual, non-group health plan contracts, and health insurance
policies.
FISCAL EFFECT : According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
CDI regulations, annual $300 $600
$600Special*
review of hearing requests
DMHC regulations, $250 $500
$500Special**
review of hearing requests
*Insurance Fund
**Managed Care Fund
COMMENTS : According to the author, current law prohibits plans
and insurers from post claims underwriting, which includes
rescinding, canceling, or limiting a plan contract due to the
plan's failure to complete medical underwriting and resolve all
reasonable questions arising from the application. It is well
publicized that health plans and insurers have paid large bonuses
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to their employees for rescission of policies, practiced illegal
rescission, and putting patients in harms way by rescinding their
health coverage when they need it most. The author states 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, cancellation, or
limitation of a policy. The time has come to have an unbiased
analysis on whether a 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.
"Rescission" is the process whereby insurers cancel health
coverage on the basis of alleged missing or incomplete information
on the part of the insured person at the time of application.
Rescission involves a determination by the plan that the contract
between the plan and the enrollee never existed because of a
misrepresentation by the enrollee at the time of application, and
that; therefore, any health care services the enrollee received
during the entire time of the contract are to be paid for by the
enrollee. Rescission is what is known as an equitable remedy,
where the remedy is meant to put the parties back to their
original status, with premiums refunded to the enrollee, and any
health services paid for by the plan owed by the enrollee.
The practice of waiting for a health care claim to come in and
then canceling or rescinding the policy retroactively is known as
post-claims underwriting. Post-claims underwriting is essentially
using the underwriting process after the fact instead of before
coverage is offered. In health coverage, because of the dual
regulatory frameworks of DMHC and CDI, there are different
statutory provisions that apply to health plans under DMHC and
health insurers under CDI in this area. Post-claims underwriting
is prohibited under both the Knox-Keen Health Care Service Plan
Act of 1975 (Knox-Keene) and the Insurance Code and health plans
under both frameworks are required to complete medical
underwriting and to have answered all reasonable questions arising
from written information submitted on or with an application prior
to issuing the coverage. Under Knox-Keene, the statute provides
that the prohibition against post-claims does not restrict a
plan's ability to rescind coverage in cases where the patient has
engaged in willful misrepresentation. The section of law
prohibiting post-claims underwriting in the Insurance Code does
not include the same specific reference to rescissions based on
willful misrepresentation.
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Analysis Prepared by : Melanie Moreno / HEALTH / (916) 319-2097
FN: 0006821