BILL ANALYSIS �
AB 2138
Page 1
Date of Hearing: May 2, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2138 (Blumenfield) - As Introduced: February 23, 2012
Policy Committee: InsuranceVote:13
- 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill increases the fee charged to health insurers to pay
for health and disability insurance fraud investigations and
prosecutions from $0.10 to $0.20 per insured and increases the
share of this fee revenue provided to district attorneys from
50% to 70%.
FISCAL EFFECT
1)The Fraud Health and Disability revenue, based on the existing
assessment of $0.10 per year per insured, is projected at
$4,202,000 in FY 2012-13, $4,328,000 in FY 2013-14, and
$4,458,000 in FY 2014-15, with a projected annual growth rate
of three percent ongoing. Assuming the assessment is increased
from $0.10 to the full $0.20, the projected annual revenue
collection would double. Assuming regulations are promulgated
to implement this bill's provisions effective July 1, 2013,
CDI would collect an estimated $4 million in additional
revenue in FY 2013-14 and ongoing.
2)Current law requires that 50% of the revenue in the fund be
allocated to district attorneys, approximately $2,040,000 for
2012-13. Under this legislation, that amount would increase
to 70%. Based on the projected revenue noted above, this would
result in an $866,000 increase for local district attorneys in
2013-14, growing to $891,000 by 2014-15. This amount does not
account for the estimated $4 million in additional revenue
that will be generated by the fee increase. Of that new
revenue, local district attorneys will receive approximately
$2.9 million per year in additional revenue.
AB 2138
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3)The cost of promulgating the required regulations to increase
the fee and the share of funding for district attorneys would
be minor and absorbable within existing resources.
COMMENTS
1)Purpose of the bill . According to the author, health and
disability insurance fraud in California is on the rise.
While fraudulent claims are increasing, the author argues
there are insufficient funds to investigate and prosecute
these claims. Although there are no precise figures, it is
believed that fraudulent activities account for billions of
dollars annually in added health care costs nationally. The
author argues that an incremental assessment may prove to be
cost effective given how much fraud costs the insured, the
insurer, the state of California, and society as a whole.
2)Prevalence of Health Insurance Fraud . According to the FBI,
fraudulent billings to health care programs, public and
private, are estimated between three and 10% of total health
care expenditures. Over time, fraud schemes have become more
sophisticated and complex and are now being perpetrated by
organized crime groups, corporate-driven schemes, and
systematic abuse by healthcare providers. Health care fraud
is expected to continue to rise as people live longer and
healthcare expenditures continue to grow as a fraction of
gross domestic product.
3)Support . This bill is supported by the State Insurance
Commissioner and has no registered opposition. In his support
letter the commissioner notes that CDI's Advisory Task Force
on Insurance Fraud found that health and disability insurance
lines had insufficient policy assessments to support a
statewide anti-fraud effort. This bill is an attempt to
address that concern by giving the commissioner the authority
to increase fees.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081