BILL ANALYSIS �
AB 2138
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CONCURRENCE IN SENATE AMENDMENTS
AB 2138 (Blumenfield)
As Amended June 18, 2012
Majority vote
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|ASSEMBLY: |71-2 |(May 29, 2012) |SENATE: |36-0 |(August 22, |
| | | | | |2012) |
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Original Committee Reference: INS.
SUMMARY : Increases the fee charged to pay for health and
disability insurance fraud investigations and prosecutions
(fraud fee) from $0.10 to $0.20 per insured and increases the
share of this fee revenue provided to district attorney's from
50% to 70%.
The Senate amendments allow insurers to recoup the fee through a
premium surcharge or through an increase in premiums. This
bill:
1)Increases the maximum fraud fee that may be charged by the
Insurance Commissioner (commissioner) from $0.10 to $0.20 per
insured.
2)Increases the share of fraud fee revenue allocated to district
attorney's from 50% to 70%.
3)Reduces the share of fraud fee revenue allocated to the
Department of Insurance (DOI) from 50% to 30%.
4)Requires the commissioner to adopt regulations to implement
these changes.
5)Permits insurers to recoup the cost of the fraud fee through
either a premium surcharge or an increase in premiums.
FISCAL EFFECT : The Senate Appropriations Committee estimates:
1)One-time costs of about $40,000 to the Insurance Fund to
revise existing regulations.
2)Ongoing increased revenues to the DOI of about $405,000 per
year to the Insurance Fund for investigations of insurance
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fraud.
3)Ongoing increased revenues to local district attorneys of
about $3.6 million per year for investigations of insurance
fraud.
COMMENTS : According to the author, health and disability
insurance fraud in California is on the rise. While fraudulent
claims are increasing, 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. 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.
The fraud fee was established in 1991 with the current cap of
$0.10 per insured and the fee cap has not been increased since
then. Much of the increase called for in this bill offsets the
impact of inflation (the fee would need to be increased to $0.17
to adjust for the impact of inflation since 1991). The bill
proposes a modest increase in real revenue to increase the
resources available for fraud investigations and prosecutions.
The department estimates that the proposed increase would
produce approximately $4 million per year in added revenue.
According to the Federal Bureau of Investigation, fraudulent
billings to health care programs, both public and private, are
estimated between 3% 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.
The fraud fee supports criminal investigations by the DOI's
Fraud Division and prosecution by district attorneys of
suspected fraud involving disability and healthcare fraud. This
program area includes fraudulent claims involving:
1)Dental Care
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2)Billing Fraud Scheme
3)Immunization Fraud
4)Unlawful Solicitation
5)Durable Medical Equipment
Analysis Prepared by : Paul Riches / INS. / (916) 319-2086
FN: 0004597