BILL ANALYSIS Ó
AB 1761
Page 1
Date of Hearing: March 27, 2012
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 1761 (John A. Pérez) - As Introduced: February 17, 2012
SUBJECT : California Health Benefit Exchange.
SUMMARY : Gives the Department of Managed Health Care (DMHC) and
the Commissioner of the California Department of Insurance (CDI)
enforcement authority over licensees (and solicitors) who hold
themselves out as representing or providing services on behalf
of the California Health Benefit Exchange (Exchange) without a
valid agreement. Makes holding oneself out as representing,
constituting, or otherwise providing services on behalf of the
Exchange without a valid agreement unfair competition.
Specifically, this bill :
1)Prohibits an individual or entity from holding himself,
herself, or itself out as representing, constituting, or
otherwise providing services on behalf of the Exchange unless
that individual or entity has a valid agreement with the
Exchange to engage in those activities. Extends the violation
to any individual or entity that aids or abets another
individual or entity in violation of this prohibition.
2)Makes it an unfair business practice for a solicitor,
solicitor firm, or a health care service plan to hold himself,
herself, or itself out as representing, constituting, or
otherwise providing services on behalf of the Exchange unless
the solicitor or solicitor firm has a valid agreement with the
Exchange to engage in those activities.
3)Adds to the list of practices defined as unfair methods of
competition and unfair and deceptive acts or practices in the
business of insurance holding oneself out as representing,
constituting, or otherwise providing services on behalf of the
Exchange without a valid agreement to engage in those
activities.
EXISTING LAW :
1)Establishes DMHC to regulate health plans and CDI to regulate
health insurance.
AB 1761
Page 2
2)Establishes the Exchange pursuant to the federal Patient
Protection and Affordable Care Act (ACA) which authorizes
states to establish health benefit exchanges for individuals
and small business to compare health insurance products and
purchase policies from among four categories: Bronze, Silver,
Gold, and Platinum, and for some purchasers, obtain subsidies
and tax credits.
3)Authorizes the DMHC Director to suspend or revoke a health
plan's license or issue disciplinary action. Provides for
civil penalties not to exceed $2,500 per violation, and
criminal penalties no more than $10,000 or one year
imprisonment or jail, or both.
4)Makes any person who engages in any unfair method of
competition or any unfair or deceptive act or practice, as
defined, liable to the state for a civil penalty to be fixed
by the commissioner of the CDI, not to exceed $5,000 for each
act, or, if the act or practice was willful, a civil penalty
not to exceed $10,000 for each act.
FISCAL EFFECT : This bill has not yet been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill
helps prevent deceptive marketing of the Exchange by not
allowing individuals or entities to represent themselves as
acting on behalf of the Exchange unless authorized to do so by
the Exchange. The author indicates that in January 2014, the
Exchange will be operational and need a marketing strategy to
create awareness for its products. The ACA requires that
exchanges develop "navigators" who will help reach and educate
potential enrollees. However, the navigators' specific roles
and responsibilities have yet to be defined by the state. The
author adds that the Health and Safety Code defines "unfair
business practices" for entities regulated by DMHC, the
Insurance Code defines "unfair methods of competition and
unfair deceptive acts or practices in the business of
insurance" for entities regulated by CDI, and the Government
Code establishes the duties of the Exchange, but none of these
code sections address the issue of deceptive marketing of the
Exchange.
2)BACKGROUND . On March 23, 2010, President Obama signed the ACA
AB 1761
Page 3
(Public Law 111-148), as amended by the Health Care and
Education Reconciliation Act of 2010 (Public Law 111-152).
Among other provisions, the new law makes statutory changes
affecting the regulation of and payment for certain types of
private health insurance. Each state is required to establish
an American Health Benefit Exchange and a Small Business
Health Options Program Exchange by 2014 for individuals and
small employers with 50 to 100 employees; after 2017, states
have the option of opening the small business exchange to
employers with more than 100 employees. States can opt to
provide a single exchange for individuals and small employers.
Groups of states can form regional exchanges or states can
form more than one in-state exchange, but the exchanges must
serve a geographically distinct area. While the individual
and small-group markets will not be replaced by the exchanges,
the same market rules will apply inside and outside the
exchanges. Premium subsidies can be used only for plans
purchased through the exchanges. The Exchange was established
in 2010 as an independent public entity within state
government with a five-member board appointed by the Governor
and Legislature.
3)SUPPORT . Health Access California supports this bill because
at the moment that AB 1602 (John A. Pérez), Chapter 655,
Statutes of 2010, was enacted to create the official Exchange
to begin implementation of the ACA, there have been misleading
websites put up by agents and brokers that appear to be the
official website of the Exchange. According to Health Access
California this bill takes the simple step of saying that only
an individual or entity with a valid, in-force agreement with
the Exchange can hold themselves out as acting on behalf of
the Exchange.
4)RELATED LEGISLATION . SB 1313 (Lieu), among other provisions,
prohibits a person from making any statement to a person that
is known, or should have been known, to be a misrepresentation
regarding the requirements of the ACA. SB 1313 is pending in
the Senate.
5)PREVIOUS LEGISLATION .
a) AB 1602 establishes the Exchange as an independent
public entity to purchase health insurance on behalf of
Californians, including those with incomes of between 100%
and 400% of the federal poverty level, and small
AB 1761
Page 4
businesses. Clarifies the powers and duties of the board
governing the Exchange relative to the administration of
the Exchange, determining eligibility and enrollment in the
Exchange, and arranging for coverage under qualified
carriers.
b) SB 900 (Alquist), Chapter 659, Statues of 2010
establishes the Exchange and requires the Exchange to be
governed by a five-member board, as specified.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Health Underwriters
Health Access California
Insurance Brokers and Agents of the West
National Association of Insurance and Financial Advisors of
California
Opposition
None on file.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097