BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 2138|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: AB 2138
Author: Blumenfield (D)
Amended: 6/18/12 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE : 8-0, 6/28/12
AYES: Calderon, Gaines, Anderson, Corbett, Correa, Lieu,
Lowenthal, Wyland
NO VOTE RECORDED: Price
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/6/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
ASSEMBLY FLOOR : 71-2, 5/29/12 - See last page for vote
SUBJECT : Health insurance fraud: annual fee
SOURCE : Department of Insurance
DIGEST : This bill grants the Insurance Commissioner the
authority to raise the special purpose assessment that
funds investigations and prosecution of fraudulent
disability insurance claims up to 20 cents annually per
insured.
ANALYSIS : Existing law:
1.Provides for the regulation of disability insurers by the
Insurance Commissioner;
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2.Requires a disability insurer or other entity liable for
any loss due to health insurance fraud doing business in
California to pay an annual fee that does not exceed
$0.10 per year for each insured in order to fund
increased investigation and prosecution of fraudulent
disability insurance claims;
3.Requires that 50% of those funds be distributed to the
Fraud Division of the Department of Insurance for
enhanced investigative efforts and that the other 50% be
distributed to local district attorneys for the
investigation and prosecution of disability insurance
fraud cases, as specified.
This bill:
1.Authorizes the Commissioner to increase the fee to no
more than $0.20 per year for each insured and would
require that 30% of those funds go to the Fraud Division
of the department and that 70% go to the local district
attorneys;
2.Requires the Commissioner to adopt regulations to
implement these provisions;
3.Authorizes an insurer to recoup this fee by way of a
surcharge on premiums or by including the fee within the
insurer's rates, as specified.
Background
According to DOI's website, although there are no precise
figures, it is believed that fraudulent activities account
for billions of dollars annually in added health care costs
nationally. Health care fraud causes losses in premium
dollars and increases health care costs unnecessarily.
Disability and Healthcare Fraud Program . DOI also states
that from 2007 to 2010, it received complaints of over
6,000 health and disability suspected fraudulent claims
statewide, with only a fraction of those claims referred to
the local district attorneys (DAs). The DAs were only able
to conduct 656 investigations, resulting in 221 arrests,
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184 convictions by local DAs, and an annual average of $233
million in chargeable fraud. This only represents a small
portion of total fraudulent activity currently being
perpetuated within the state because most cases go
unreported to DOI. Due to limited resources, DOI closes
some claims and only a fraction of those claims are turned
over to the DAs for further investigation and prosecution.
Disability and Healthcare Fraud Program . Insurance Code
section 1872.85 requires every admitted insurer that sells
disability and health insurance to contribute to the
Disability Insurance Fraud Account. The insurer pays an
annual fee, determined by the Insurance Commissioner, up to
10 cents per each policy it issues. Half of the fee
collected is distributed to DOI's Fraud Division and the
other half to local district attorneys for investigation
and prosecution of fraud cases. According to the author,
the annual collection is estimated at $4,080,000 annually
with $2,040,000 allocated to DOI's Fraud Division and
$2,040,000 to local district attorneys.
This bill will permit the Commissioner to Increase the Fee
and Shifts More Funds to DAs. This bill allows the
Commissioner to increase the fee from the current 10 cents
per policy to up to 20 cents per policy. The author
estimates that this will provide an increase of $4,080,000
for both local district attorneys and DOI's investigation
and enforcement units, totaling $8,160,000. It also shifts
a greater share to the local district attorneys, 30 percent
to the Fraud Division and 70 percent to qualifying district
attorneys.
Recoupment of Costs . Recent amendments also provide that
the insurer may, within the year the assessment is paid,
recoup these costs by way of a surcharge on the premium as
specified.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
One-time costs of about $40,000 (Insurance Fund) to
revise existing regulations.
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Ongoing increased revenues to the Department of Insurance
of about $405,000 per year (Insurance Fund) for
investigations of insurance fraud.
Ongoing increased revenues to local district attorneys of
about $3.6 million per year for investigations of
insurance fraud.
SUPPORT : (Verified 8/6/12)
Department of Insurance (source)
California District Attorneys Association
California State Sheriffs
Valley Industry and Commerce Association
District Attorneys: Alameda County, Kern County, Monterey
County, Orange County, Riverside County, Sacramento
County, San Bernardino County, San Diego County, Santa
Clara County, San Diego County, San Mateo County, Shasta
County District, Yolo County
ASSEMBLY FLOOR : 71-2, 5/29/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Chesbro, Conway, Cook, Davis, Dickinson, Eng,
Feuer, Fong, Fuentes, Furutani, Beth Gaines, Galgiani,
Garrick, Gatto, Gordon, Gorell, Grove, Hagman, Hayashi,
Roger Hern�ndez, Hill, Huber, Hueso, Huffman, Jeffries,
Jones, Knight, Lara, Logue, Bonnie Lowenthal, Ma,
Mendoza, Miller, Mitchell, Monning, Morrell, Nestande,
Norby, Olsen, Pan, Perea, V. Manuel P�rez, Portantino,
Silva, Skinner, Smyth, Solorio, Swanson, Torres, Valadao,
Wieckowski, Williams, Yamada, John A. P�rez
NOES: Harkey, Nielsen
NO VOTE RECORDED: Cedillo, Donnelly, Fletcher, Halderman,
Hall, Mansoor, Wagner
JJA:n 8/7/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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