BILL ANALYSIS �
SENATE INSURANCE COMMITTEE
Senator Ronald Calderon, Chair
SB 615 (Calderon) Hearing Date: April 27, 2011
As Amended: April 13, 2011
Fiscal: Yes
Urgency: No
SUMMARY Would require all sales of health coverage, whether
subject to the Insurance Code or the Health and Safety Code
Knox-Keene Act, to be conducted by licensed insurance agents,
subject to Department of Insurance licensing, education and
disciplinary authority, as of July 1, 2012.
DIGEST
Existing law
California Insurance Code
1.Under California insurance law, life and disability insurance
companies can transact accident and sickness insurance and
health insurance. (See California Insurance Code (CIC)
Sections 106 and Section 10275)
2.To transact the business of life, accident and health
insurance, an individual must me licensed under the Insurance
Code and meet prelicensure requirements, continuing education
requirements and are subject to discipline for failure to meet
the licensing requirements and obligations under the Insurance
Code.
3."Transact" as applied to insurance (CIC Sec. 35) includes any
of the following:
a. Solicitation
b. Negotiations preliminary to execution
c. Execution of a contract of insurance
d. Transaction of matters subsequent to execution of
the contract and arising out of it
4.Health insurance means individual or group disability
SB 615 (Calderon), Page 2
insurance policies providing coverage for hospital, medical or
surgical benefits. This type of health insurance product is
subject to oversight by the Department of Insurance. Benefits
under these lines of insurance are provided on the basis of
indemnification or reimbursement for medical expenses incurred
by their policyholders.
5.Outside California's Insurance Code, law, there are numerous
kinds of organizations which provide a means to access
health-related benefits.
California Health and Safety Code
6.Under California law, health maintenance organizations (HMOs),
also referred to as Health Care Service Plans, are regulated
by the Division of Managed Health Care (DMHC) pursuant to the
Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene).
Unlike insurers which only indemnify against or reimburse
medical costs, health care service plans may actually provide
the medical services directly to their plan subscribers.
7.By their statutory definition, health care service plans may
only provide "health care services". This means health care
service plans may not offer auxiliary types of disability
coverage, such as income protection, credit disability
coverage, or accidental death and dismemberment coverage. Such
auxiliary lines of coverage, while excluded from the statutory
definition of "health insurance" under the Insurance Code, are
classes of disability insurance.
8.The Knox-Keene law (Health and Safety Code Section 1345 (l)
defines the activity of "solicitation" as "any presentation or
advertising conducted by, or on behalf of, a plan, where
information regarding the plan, or services offered and
charges therefor, is disseminated for the purpose of inducing
persons to subscribe to, or enroll in, the plan."
9.Subdivision (m) of Section 1345, the Knox-Keene law defines
"Solicitor" as "any person who engages in the acts defined in
subdivision (l)."
10.Under the Knox-Keene law, the Director of the Department of
Managed Health Care is authorized to:
a. Require that solicitors, solicitor firms, and
principal persons engaged in the supervision of
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solicitation for plans meet such reasonable and
appropriate standards with respect to training,
experience, and other qualifications as the director
finds necessary and appropriate in the public interest or
for the protection of subscribers, enrollees, and plans.
For such purposes, the director may require individuals
to pass examinations prescribed by the Director.
(California H & S Code Section 1359)
b. Enforce prohibitions on the use of any advertising
or solicitation which is untrue or misleading, or any
form of evidence of coverage which is deceptive.
(California H & S Code Section 1360)
c. Oversee market conduct , including enforcing a
prohibition on any plan, or solicitor, or representative
using or permitting the use of any verbal statement which
is untrue, misleading, or deceptive or make any
representations about coverage offered by the plan or its
cost that does not conform to fact. All verbal
statements are held to the same standards as those for
printed matter.
d. Administer a system of prior approval of advertising
concerning plan terms and conditions. (California H & S
Code Section 1361)Administer a system of standardized
disclosures concerning plan features and coverage
(California H & S Code Section 1363)
California Government Code
1.Establishes the duties and operations of the California Health
Benefits Exchange to facilitate, by means of an organized and
competitive insurance marketplace, the ability of individuals
and small businesses to:
a. Choose amongst qualifying health plans operating
under common rules related to pricing and coverage
standards;
b. Better understand coverage choices and plan
performance by requiring information to be presented in a
consumer friendly format with standardized explanations
of benefits, costs, and customer satisfaction. Claim
their premium and cost sharing subsidies.
2.The California Health Benefits Exchange program has the
SB 615 (Calderon), Page 4
object, in accordance with federal law, to make it easier for
individuals and small businesses to compare plans and buy
health insurance on the private market. To this end, the
Exchange law provides for establishment of a "Navigator" in
accordance with subdivision (i) of Section 1311 of the federal
act.
3.Any entity chosen by the Exchange as a Navigator" shall do all
of the following:
a. Conduct public education activities to raise
awareness of the availability of qualified health plans;
b. Distribute fair and impartial information concerning
enrollment in qualified health plans;
c. Facilitate enrollment in qualified health plans;
d. Provide referrals to any applicable office of health
insurance consumer assistance or health insurance
ombudsman established under Section 2793 of the federal
Public Health Service Act, or any other appropriate state
agency or agencies;
e. Provide information in a manner that is culturally
and linguistically appropriate to the needs of the
population being served by the Exchange.
This bill
1. Would, as of July 1, 2012, for purposes of both the
Knox-Keene Act in the Health and Safety Code and the
Insurance Code, prohibit any person from soliciting,
negotiation or selling of any health care service plan
contracts, specialized health care service plan contracts,
Medicare Advantage Plans under Medicare Part C or Medicare
Supplement contracts unless the person is licensed by the
Insurance Commissioner as an accident and health agent.
2. Revises the scope of a life licensee under the Insurance
Code so that, in addition to the current authorization to
act on behalf of an insurer or a disability insurer, the
license will include authority to transact on behalf of a
health care service plan, effective July 1, 2012, health
care service plan contracts, specialized health care
service plan contracts, Medicare Advantage Plans under
Medicare Part C or Medicare Supplement contracts.
3. The act also expands the scope of the Accident and
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Health class of life licensee to include transactions in
these contracts or plans effective July 1, 2012.
4. Specifies applicants for initial licensure as an
accident and health agent are subject to the same
prelicensing education standards, and licensees subject to
license renewal under this Act are subject to the same
continuing education requirements, as all other accident
and health agents.
5. Authorizes the Insurance Commissioner to adopt all
necessary rules and regulations to implement this
requirement; the Commissioner is granted sole authority to
enforce the licensure requirement added by this act to the
Knox-Keene law and the Insurance Code and the act states
the Director of the Department of Managed Health Care is
precluded from enforcing these provisions.
6. Notwithstanding the exclusive enforcement authority
provided as described in paragraph 4 above, this act
requires the Insurance Commissioner and the Director of the
Department of Managed Health Care to share information with
regard to investigations, discipline and enforcement of
violations under this licensing law.
7. Provides this Act shall not affect the application or
enforcement by the Director of the Department of Managed
Health Care of Section 1359 of the Health and Safety Code
or any other provision of the Health and Safety Code that
relates to solicitors and is not intended to supersede any
other requirement or regulation that applies to solicitors
or solicitor firms.
8. Specifies that nothing in the bill shall apply to
qualifications for navigators pursuant to paragraph (1) of
subdivision (l) of Section 100502 of the Government Code
which requires Navigators to "conduct public education
activities to raise awareness of the availability of
qualified health plans"
COMMENTS
Purpose of the bill: According to the Author, a consumer's
purchase of health insurance - whether via a health insurance
product or a health care service plan is a serious matter, with
serious consequences.
SB 615 (Calderon), Page 6
For this reason, consumers need a basis for confidence in those
persons selling health care service plans. All 49 other states
require that one be a licensed agent in order to sell health
insurance products or health care service plans. In California,
one must be a licensed agent in order to sell health insurance
products, but there is no such requirement for health care
service plans.
Senate Bill 615 would address the licensure gap of California
law by requiring all persons who transact (as defined in Section
35, California Insurance Code) health care service plan and
related products to be licensed by the California Department of
Insurance as an Accident and Health agent.
1. Background and Discussion:
The foundation of consumer protection under California's
insurance code is the requirement that insurance agents be
licensed to market insurance products. This requirement
results in the Insurance Commissioner ensuring that agents
follow all the consumer protection laws and regulations. It
also requires agents to be knowledgeable and ethical, to
take continuing educations courses and to meet minimum
licensure standards both initially and ongoing. All 50
states have licensing requirements for individuals selling
insurance products.
Licensure also allows for a place and a process for consumer
complaints should an individual feel they have been given
the wrong information or a statute or regulation has been
broken. It allows the Commissioner to ensure that anyone not
meeting the requirements be disciplined or have their
license revoked.
California state law does not specify licensing requirements
for persons selling products under the Knox-Keene or related
laws. This means that from the standpoint of consumers, the
health insurance/health plan marketplace includes persons
who hold themselves forth as providing useful guidance as to
consumers available options who are not subject to uniform
accountability for lapses in their conduct or advice,
although Knox-Keene does approach marketplace issues through
standardized disclosures and prior review of marketing
materials and a certification program
SB 615 (Calderon), Page 7
Senate Bill 615 proposes to strengthen accountability across
the health marketplace by establishing uniform licensing
requirement administered by the office of the Insurance
Commissioner, thereby providing consumers in the Health Care
Service Plan market with protections like those provided to
consumers purchasing health insurance.
2. Summary of Arguments in Support:
a. According to the California Association of Health
Underwriters (CAHU), an SB 615's C0-Sponsor, the Access
to Care Act (ACA) requires that all navigators be trained
and licensed if appropriate to enroll individuals and
small groups in the exchange. The Insurance Commissioner
currently regulates the specific curriculum for a Health
and Accident insurance license as well as the
institutions that provide the actual courses. The current
requirement is 20 hours of pre-licensing course work and
an additional 12 hours of ethics and code. In addition
the applicant must complete an exam administered by the
Commissioner and pass a background check. This insures
that all applicants actually have the requisite knowledge
to place an individual or employer in a health insurance
product and are in compliance with the consumer
protection requirements. Everything is already in place
to provide the necessary training and licensing as
required by the PPACA
b. The National Association of Insurance and Financial
Advisors (NAIFA), also a Co-Sponsor of SB 615, states the
bill will assure that consumers receive the best possible
services when they are purchasing health care coverage.
The bill will require that all persons who sell any
health care coverage - whether an insurance policy or a
health care service plan - must be trained and licensed.
SB 615 conforms California law to the licensing
requirements of the other 49 states - all of which
require (unlike California) a license to sell health care
service plans.
NAIFA also indicates purchases of health care coverage
are life impacting acquisitions so it is essential that
consumers be secure in the knowledge that the persons who
are facilitating that purchase be competent and
accountable for the advice they give to consumers. SB
615 will prevent the nightmare scenario of a consumer
SB 615 (Calderon), Page 8
being sold useless insurance coverage by someone who
bears no accountability for that transaction.
3. Summary of Arguments in Opposition:
a. The partner organizations in California's 100%
Campaign (a coalition to increase health access for
children) have a position of "opposed unless amended."
The 100% Campaign membership is comprised of:
The Children's Partnership
PICO California
California Children's Health Initiatives
Children Now
Children's Defense Fund - California
United Ways of California
The 100% Campaign states a concern that this legislation,
both as introduced and as most recently amended, could"
unnecessarily restrict the ability of Californians to
access health insurance coverage through managed care
plans" and that it believes the bill fails to
sufficiently consider "opportunities that will be
available" as California implements the Affordable Care
Act (ACA) and it's Health Benefit Exchange .
The 100% Campaign states "California is moving quickly to
implement the ACA by expressing its interest in creating
a "culture of coverage" and by establishing the first in
the nation Health Benefits Exchange under ACA." This will
require "moving roughly 4.7 million Californians into
health coverage either through Medi-Cal or coverage
delivered through the Health Benefit Exchange by 2014."
The Campaign asserts most these newly eligible
Californians "will be enrolled in health care service
plans (also known as managed care plans)" and it is
important not to impede efforts to provide consumers with
information in this process. The campaign expresses
concern "enrollment could be made more difficult by
unnecessarily restricting the number of individuals and
entities that can provide information and assistance to
Californians" seeking for health coverage."
The 100% Campaign requests amendments to:
SB 615 (Calderon), Page 9
i. Ensure that the primary duty of those
soliciting, negotiating or selling coverage is to
the health consumer, not to the insurance
carrier;
ii. Provide strong consumer protections that
ensure that agents are not "steering" healthy
consumers to insurance carriers, thus encouraging
adverse selection;
iii.Provide for training and expertise standards
applicable to both private and public health care
programs; and, finally,
iv. Provisions specifically addressing the need
for cultural and linguistic expertise if the
needs of California's ethnically and
linguistically diverse population is to be
adequately served.
a. Health Access California is opposed to the bill as
most recently amended, stating:
Health Access California is "unclear as to what problem
is being fixed by SB615" They state that "(s)ince 1975,
health care service plans have been regulated under the
Knox-Keene Act. The Knox-Keene Act which regulates
health care service plans does not require that those who
sell coverage be agents or brokers licensed by the
Department of Insurance." Health Access California asks
rhetorically "Has there been an eruption of problems with
sales of health care service plans due to lack of
appropriate oversight of solicitors? What problem is
SB615 as proposed to be amended attempting to solve?"
Health Access states it opposes requiring health care
service plans which are regulated by the Department of
Managed Health Care to use licensed agents or brokers
regulated which are regulated by the Department of
Insurance. It states this seems to them to be a "recipe
for regulatory confusion about which department has
responsibility", noting the DOI has no expertise in the
requirements of the Knox-Keene Act, which Health Access
describes as a "very different body of law than the
insurance law."
Health Access states it would support requiring
solicitors regulated by the Department of Managed Health
Care to have regulatory standards and training comparable
SB 615 (Calderon), Page 10
to the standards and training that we support for
insurance agents and brokers, but since the Knox-Keene
Act includes tough standards for marketing as well as
tough scrutiny of marketing materials, Health Access is
opposed to SB615 unless it is amended to require that
agents and health insurers are subject to the same
marketing standards and the same tough scrutiny of
marketing materials that is currently required for health
care service plans and their solicitors.
Health Access also says the first duty of any individual
or entity selling coverage should be to the consumer, not
to the insurer or the health plan and this should be the
standard applicable to insurance licensees.
Finally, Health Access asserts its belief that current
law, by permitting insurance agents and brokers who sell
health insurance coverage without maternity coverage to
direct consumers who become pregnant to public programs,
encourages steering and this should be addressed by agent
compensation changes which eliminate or minimize steering
of risk because the resulting adverse selection
disadvantages the exchange. If insurers or health plans
pay agents and brokers better for healthier lives than
the exchange pays, then agents and brokers will face
significant financial incentives to steer risk.
Health Access California requests amendments:
i. Requiring agent compensation to be:
1. A flat amount that does
not vary depending on the health status,
risk factor, age, geographic region,
wellness incentive or any other factor;
2. The same amount whether
the individual or small business is covered
under the California Health Benefits
Exchange or in the outside, private market;
and
3. The same amount regardless
of regulator
ii. Requiring all agents and brokers
licensed to transact insurance coverage to be
trained in public programs in a manner that
equals or exceeds the training currently provided
with respect to private insurance.
SB 615 (Calderon), Page 11
b. Consumer's Union is opposed to the bill, citing
similar concerns to those of the 100% Campaign and Health
Access.
c. Local Health Plans of California states the
requirement to use licensed agents would
disproportionately hurt non-profit health plans such as
the local initiatives which may wish to participate in
California's Exchange.
1. Amendments: None Proposed
2. Prior and Related Legislation: None
LIST OF REGISTERED SUPPORT/OPPOSITION
Support
California Association of Health Underwriters (co-sponsor)
Insurance Brokers and Agents of the West (co-sponsor)
National Association of Insurance and Financial
Advisors-California (NAIFA) (co-sponsor)
Opposition
AFSCME
California's 100% Campaign, a coalition of:
The Children's Partnership
Children Now
Children's Defense Fund - California
PICO California
California Children's Health Initiatives
United Ways of California
California Pan-Ethnic Health Network
CalPIRG
Congress of California Seniors
Consumer's Union
Health Access California
Local Health Plans of California
Western Center on Law and Poverty
SB 615 (Calderon), Page 12
Consultant: Ken Cooley (916) 651-4110