BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 1313
AUTHOR: Lieu
AMENDED: April 18, 2012
HEARING DATE: April 25, 2012
CONSULTANT: Trueworthy
SUBJECT : Health care coverage.
SUMMARY : Makes several changes to existing marketing and
advertising rules for health plans, insurers, solicitors,
brokers, and agents.
Existing law:
1.Provides for the regulation of health insurers (carriers) by
the California Department of Insurance (CDI) under the
Insurance Code and provides for the regulation of health plans
(carriers) by the Department of Managed Health Care (DMHC)
pursuant to the Knox-Keene Health Care Service Plan Act of
1975.
2.Prohibits a plan from publishing or distributing an
advertisement unless a copy thereof has first been filed with
the Director of the DMHC at least 30 days prior to that use
and the Director has not found the advertisement to be untrue,
misleading, deceptive, or in violation of the Knox-Keene Act
within those 30 days.
3.Authorizes the Director of DMHC to require a plan to publish a
correction or retraction of an untrue, misleading, or
deceptive statement contained in the advertisement and to
prohibit the plan from publishing the advertisement or a
material revision without filing a copy with the Director if
an advertisement fails to comply with the Knox-Keene Act.
4.Authorizes the Director of DMHC to exempt a plan or
advertisement from the requirements described above.
5.Prohibits a plan, solicitor, solicitor firm, or representative
from using any advertising or solicitation, or making or
permitting the use of any verbal statement, that is untrue or
misleading or any form of evidence of coverage that is
deceptive.
Continued---
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6.Prohibits an insurer, agent, or broker from causing to be
issued a misrepresentation of the terms of the policy issued
by the insurer
7.Requires DMHC and CDI to adopt regulations establishing
standards and requirements to provide enrollees and insureds
with appropriate access to language assistance in obtaining
health care services.
8.Requires plans and insurers to translate specified vital
documents into a language when a certain proportion of its
enrollees or insureds indicate a preference for written
materials in that language.
9.Authorizes the Director of DMHC 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.
10.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 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.
11.Establishes the federal Patient Protection and Affordable
Care Act (ACA), which imposes various requirements, some of
which take effect on January 1, 2014, on states, carriers,
employers, and individuals regarding health care coverage.
12. Establishes the California Health Benefit Exchange
(Exchange) pursuant to the ACA to facilitate the purchase of
qualified health plans by qualified individuals and qualified
small employers by January 1, 2014.
13. Requires every individual to be covered under
minimum essential coverage, as specified, and requires every
health insurance issuer offering coverage in the individual or
small group markets to ensure coverage includes specified
essential health benefits.
This bill:
1.Prohibits any person, including carriers, from making any
statements to any other person that is known or should have
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been known to be a misrepresentation of the ACA.
2.Defines "misrepresentation" to be a written or printed
statement or item of information to be deemed a
misrepresentation whether or not it is literally true if, in
the total context in which the statement is made or the item
of information is communicated, the statement or item of
information may be understood by a person not possessing
special knowledge regarding health care coverage as indicating
any benefit or advantage, or the absence of any exclusion,
limitation, or disadvantage, of possible significance to an
enrollee, potential enrollee, or potential subscriber in a
plan, and such is not the case.
3.Prohibits, from January 1, 2013, until December 31, 2019, a
carrier from publishing or distributing an advertisement
unless a copy has first been filed with the Director at least
60 days prior to that use. Authorizes the Director of DMHC and
CDI to extend this period of review by an additional 60 days.
Beginning January 1, 2020, a copy to be filed at least 30 days
prior to any use.
4.Allows the Director of DMHC and CDI to exempt the following
types of materials from the above requirements:
a. Advertisements or marketing materials that include
endorsements or ratings about quality of care.
b. Advertisement or marketing materials about new health
care products.
c. Enrollment-related materials, including, but not limited
to, disclosure forms, contract documents, and enrollment
forms.
d. Any other materials as provided by regulation.
1.Requires DMHC and CDI to require a carrier to publish a
correction or retraction of an untrue, misleading, or
deceptive statement contained in the advertisement and to
prohibit the plan from publishing the advertisement or a
material revision without filing a copy with the Director.
2.Requires, prior to a carrier publishing or distributing an
advertisement, that the Commissioner by notice has not found
the advertisement, wholly or in part, to be untrue,
misleading, deceptive, or otherwise not in compliance. This is
existing law for a health plan.
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3.Creates a file and use process for insurers that allows an
insurer or agent that has been continuously licensed for the
preceding 18 months to publish or distribute, or allow to be
published or distributed on its behalf, an advertisement
without having filed the advertisement for the Commissioner's
prior approval, if the insurer or agent and the material
comply with each of the following conditions:
a. The advertisement or a material has not been
previously disapproved and
b. The insurer or agent files a true copy of each new
or materially revised advertisement with the Commissioner
not later than 10 business days after publication or
distribution of the advertisement.
1.Prohibits a person whose license is revoked or suspended, or
who is disciplined, from becoming a navigator under the
Exchange, becoming licensed as a life licensee agent, being a
solicitor or solicitor firm, being approved for licensure
under DMHC, or becoming a designated individual or
organization application assistors authorized to receive a fee
under the insurance code.
2.Requires DMHC and CDI to adopt rules to minimize duplication
with disclosure requirements under California law when
implementing Section 2715 of the federal Public Health Service
Act, relating to development and utilization of uniform
explanation of coverage documents and standardized
definitions.
3.Prohibits an insurer or agent from using any advertising or
solicitation, or making or permitting the use of any verbal
statement, that is untrue or misleading or any form of
evidence of coverage that is deceptive.
4.Prohibits, after January 1, 2014, a specialized health plan
from offering, issuing, selling, or renewing an individual or
group plan contract that does not, at a minimum, cover basic
health care services unless the individual or group has proof
of enrollment in minimum essential coverage.
5.Allows the Exchange, for purposes of number 11, to provide
proof of coverage for products offered through the Exchange.
6.Prohibits an entity that arranges for the provision of health
care services from offering or selling a product to an
individual or group unless the individual enrollee has proof
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of enrollment in minimum essential coverage.
7.Requires a carrier that offers, issues, or sells a plan
contract that provides coverage that does not constitute
minimum essential coverage to include, in all solicitations,
marketing materials, and the evidence of coverage, a
disclosure that the contract does not meet the minimum
essential coverage requirements of federal law with respect to
minimum essential coverage.
8.Prohibits a health insurer, a specialized health insurer, or
an insurer offering policies or certificates of specified
disease or hospital confinement indemnity insurance from
offering, issuing, selling, or renewing an individual or small
group health insurance policy that does not, at a minimum,
cover essential health benefits, unless the individual or
group has proof of enrollment in minimum essential coverage,
as defined.
9.Requires a carrier that offers, issues, or sells a plan
contract or health insurance policy that provides coverage
that does not constitute minimum essential coverage to include
in all solicitations, marketing materials, and the evidence of
coverage a clear and easily identified disclosure to that
effect.
10.Requires a carrier that advertises or markets in a language
other than English to translate into that language specified
documents and requires the carrier to translate all vital
documents once the non-English-language population meets a
threshold.
11.Requires an agent, solicitor or solicitor firm to disclose to
the carrier for which the solicitor or solicitor firm markets,
sells, advertises, or negotiates health care coverage, each of
the non-English languages in which the solicitor or solicitor
firm markets, sells, advertises, or negotiates that coverage.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1.Author's statement. According to the author, the ACA has the
potential to cover four to five million individuals who
currently lack access to health care coverage. In the
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Exchange, over two million people will be eligible for
subsidies to help them purchase health insurance. Consumer
trust in the establishment and operation of the Exchange is
critical to its success. The opportunities for confusion,
misinformation and outright deception about the individual
mandate, employer requirements, who is eligible for what type
of coverage, and other provisions of federal health reform
will be considerable. The author states that in particular,
low-income consumers, communities of color and limited-English
proficient individuals as well as the small business owners in
those communities are often the most preyed upon. There are
some existing protections in Knox-Keene and some in the
Insurance Code. The author contends that this legislation
builds on those protections to ensure consumers trust in the
expansion of this program and are protected against bad actors
or unscrupulous individuals.
2.Federal health care reform. On March 23, 2010, President
Obama signed the ACA
(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. Beginning in 2014, individuals will
be required to maintain health insurance or pay a penalty,
with exceptions for financial hardship (if health insurance
premiums exceed eight percent of household adjusted gross
income), religion, incarceration, and immigration status.
Several insurance market reforms are required such as
prohibitions against carriers imposing lifetime benefit limits
and pre-existing health condition exclusions. These reforms
impose new requirements on states related to the allocation of
insurance risk, prohibit insurers from basing eligibility for
coverage on health status-related factors, allow the offering
of premium discounts or rewards based on enrollee
participation in wellness programs, impose nondiscrimination
requirements, require insurers to offer coverage on a
guaranteed issue and renewal basis, and determine premiums
based on adjusted community rating (age, family, geography and
tobacco use).
Additionally, by 2014, either a state will establish separate
exchanges to offer individual and small group coverage, or the
federal government will establish one. Exchanges will not be
insurers but will provide eligible individuals and small
businesses with access to private plans in a comparable way.
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In 2014, some individuals with income below 400 percent of the
federal poverty level (FPL) will qualify for credits toward
their premium costs and for subsidies toward their
cost-sharing. California has established an Exchange that is
operating as an independent government entity with a
five-member Board of Directors. The ACA also expands the
Medicaid program to cover adults without children and expands
the income requirements to 138 percent of FPL based on
modified adjusted gross income rules.
3.Related legislation. AB 1761 (John A. P�rez) would give DMHC
and CDI enforcement authority over licensees and solicitors
who hold themselves out as representing or providing services
on behalf of the Exchange without a valid agreement and would
make holding oneself out as representing, constituting, or
otherwise providing services on behalf of the Exchange without
a valid agreement unfair competition. AB 1761 is pending in
the Assembly Appropriations Committee.
4.Prior legislation. SB 900 (Alquist), Chapter 659, and AB 1602
(John A. P�rez), Chapter 655, Statutes of 2010, established
the Exchange.
SB 1273 (Scott), Chapter 730, Statutes 2004, prohibits an
insurer, agent or broker from making or using a statement
that is known, or should have been known, to be a
misrepresentation of the terms, benefits, or dividends of an
insurance policy, and prohibits a person from making a
statement that is known, or should have been known, to be a
misrepresentation for the purpose of inducing another person
or policyholder to take certain actions, and increases the
maximum penalty for such misrepresentations to up to one year
and/or a fine of up to $25,000, and provides that when the
loss to the victim exceeds $10,000, the maximum fine is three
times the amount of that loss.
SB 853 (Escutia), Chapter 713, Statutes of 2003, required DMHC
to adopt, not later than January 1, 2006, regulations
establishing standards and requirements to provide health care
service plan enrollees with access to language assistance in
obtaining health care services.
5.Support. SB 1313 co-sponsors and supporters state that SB
1313 will strengthen consumer protections for new health care
enrollees and protect them against potential fraudulent or
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deceptive marketing practices. Supporters contend that with
the passage of the ACA, millions of Californians will gain
access to health coverage in 2014, many of whom will have
coverage for the first time. Many of these individuals and
families are not familiar with the health insurance system.
Supporters argue that with the expansion of new programs and
the individual mandate requiring people to have insurance, it
is likely that unscrupulous actors will try to engage in
deceptive marketing practices. Immigrants and individuals with
limited English skills are especially vulnerable to these
types of practices due to confusion about the individual
mandate and eligibility rules. SB 1313 will ensure that
Californians have appropriate and accurate information that
they will need to enroll in quality health care coverage by
strengthening consumer protections, closing gaps in current
state laws, and bringing state law in line with the new
federal requirements.
Supporters write that the bill revises protections in the
Knox-Keene Act in light of implementation of the ACA and
extends those protections to the Insurance Code. Among the
most important of these protections is prior approval of
marketing materials for health insurance.
Supporters state that SB 1313 will offer important protection
against deceptive marketing practices for those who enroll in
the new health coverage made possible by the ACA. Those with
limited English skills are particularly vulnerable to those
who may unscrupulously offer insurance. Supporters state that
immigrants and those with limited English skills often
experience confusion about different insurance products and
service offerings and are not familiar with many of the health
insurance terms. SB 1313 will do much to ensure that people
will have the information that will allow them to make
informed choices, and it will better align state law the ACA.
Supporters argue that SB 1313 takes a proactive approach to
protect California's consumers from being set up and abused,
while helping the state meet the goals of health reform and
giving millions of newly eligible health care consumers a
chance to benefit from this milestone
6.Opposition. The California Association of Health Plans (CAHP)
writes that they are opposed to SB 1313 because it places
several new and onerous requirements on plans seeking to
deliver important information and materials to their enrollees
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and people seeking coverage. CAHP argues that in order to
ensure that the ACA is successful; enrollees must be able to
access health care coverage. CAHP states that the requirements
in SB 1313 will obstruct a health plan's ability to
efficiently deliver timely coverage and benefits information
to consumers. CAHP writes that it is appropriate for consumers
to be notified if a health plan does not meet the minimum
coverage provisions of the ACA and believes this provision in
SB 1313 is a worthy discussion.
Kaiser writes in opposition to SB 1313 that under this bill,
nearly every advertisement would have to be submitted for
approval before use, 60 days in advance. Every health plan
would have to submit every print ad, every TV ad and every
radio ad that discusses "quality of care" at least 60 days
ahead, and in some cases up to 120 days ahead, before it can
be used. Kaiser argues that changing the prior approval
timeline from 30 to 60 days, or possibly up to 120 days
(quadrupling the current requirement), seems rather arbitrary
and would prevent Kaiser from reacting to changes in the
marketplace and getting current information out to consumers.
The insurance brokers and agents write that while it is
appropriate that there be sufficient consumer disclosure that
a particular health insurance product does not meet the
minimum coverage provisions of the ACA, SB 1313 seeks to add
new prohibitions in both the Health and Safety Code and
Insurance Code relative to misrepresentation of the terms of
the ACA. In addition, the bill seeks to establish a new
definition of misrepresentation wherein the fact that any
written or printed statement is true is not a defense to a
claimed violation of the proposed statute. These proposed new
laws and amendments ignore the fact that Section 790.03 of the
Insurance Code, especially (a) and (b) currently cover this
type of misleading conduct and much more.
The Association of California Life and Health Insurance
Companies (ACLHIC) argues that SB 1313 would establish a
completely new prior-approval regulatory scheme for marketing
materials without any accountability to ensure the materials
are approved in a timely fashion. This new process would
prohibit an insurer from utilizing any advertisement or
solicitation unless it is filed, and ultimately approved, by
the Insurance Commissioner 60 days prior to its use. ACLHIC
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contends CDI already has the authority to ensure that all
marketing materials are accurate and not misleading. ACLHIC
also states that SB 1313 prohibits vision, dental and other
specialized or supplemental carriers from selling their
coverage without first making sure the applicant has essential
health benefits and that it is inappropriate to require dental
insurers to "police" whether someone has minimal essential
coverage, and goes far beyond federal law.
The California Chamber of Commerce writes in opposition to SB
1313, stating that it will lead to increased health care
premiums by establishing unnecessary and burdensome marketing
and advertising requirements.
Delta Dental writes this bill would prohibit a dental-only
plan or policy from being offered, sold or even renewed for
any individual or group unless the purchaser proves that each
individual enrollee or insured already has health coverage
that constitutes minimum essential coverage under the Internal
Revenue Code. However, Delta Dental argues minimum essential
coverage expressly excludes benefits, which are defined to
include dental-only benefits. SB 1313 therefore would require
issuers of dental-only plans and policies to help enforce a
federal coverage requirement expressly unrelated to the dental
plans and policies themselves. Delta Dental writes a dental
plan should not be policing consumers regarding their purchase
of health care coverage, nor should individuals who make a
financial decision to forego health insurance be precluded
from purchasing dental coverage if they wish.
7. Policy questions and concerns.
a. Does the Director need additional time than what is
allowed under current law to review an advertisement? SB
1313 increases the time from 30 days to 60 days for DMHC
and CDI to review and approve materials and allows the
regulators an additional 60 days. This could result in the
department taking 120 days to review and approve
advertisements with no demonstrable evidence that there is
a current problem this increase will solve. DMHC currently
has a 30-day review time. This is a new requirement
altogether under CDI.
b. Director discretion on deceptive advertising. Current
law gives the Director of DMHC the discretion to require
carriers to publish corrections to advertisements found to
be untrue, misleading or deceptive. SB 1313 would require
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all corrections to be re-published. Should the Director
continue to have discretionary authority?
c. New deceptive marketing requirements. Health and
Safety Code Section 1360 already states no plan,
solicitor, solicitor firm, or representative shall use or
permit the use of any advertising or solicitation which is
untrue or misleading, or any form of evidence of coverage
which is deceptive. Insurance Code Section 790.03(a)
prohibits making, issuing, circulating, or causing to be
made, issued or circulated, any estimate, illustration,
circular, or statement misrepresenting the terms of any
policy issued or to be issued or the benefits. Insurance
Code Section 790.03(b) prohibits any statement containing
any assertion, representation, or statement with respect
to the business of insurance or with respect to any person
in the conduct of his or her insurance business, which is
untrue, deceptive, or misleading, and which is known, or
which by the exercise of reasonable care should be known,
to be untrue, deceptive, or misleading.
SB 1313 would add to the existing deceptive marketing
requirements by prohibiting any person, including a plan,
from making any statements to any other person that is
known or should have been known to be a misrepresentation
of the ACA. Is it necessary to specifically prohibit
misrepresentation of the ACA?
d. Deceptive marketing under the Insurance Code. As
described above, CDI has the authority to address issues
related to untrue, deceptive or misleading marketing
material. However, this section is not limited to health
plans, but all insurers regulated by CDI. SB 1313 proposes
to add to the Insurance Code, existing deceptive marketing
language in the Health and Safety Code. Should the
Insurance Code also mirror the requirements of Knox-Keene
as SB 1313 proposes or are the existing protections
adequate?
e. Dental and vision plans. SB 1313 prohibits (page 8,
lines 26-32) specialized health care service plans from
selling their coverage without first ensuring the enrollee
has proof of enrollment in coverage that constitutes
minimum essential coverage, as defined. Is it appropriate
to require a dental-only or vision-only plan to ensure an
enrollee has proof of enrollment in coverage that
constitutes minimum essential coverage, as defined?
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SUPPORT AND OPPOSITION :
Support: California Immigrant Policy Center (co-sponsor)
California Pan-Ethnic Health Network (co-sponsor)
Consumers Union (co-sponsor)
100% Campaign
ACCESS Women's Health Justice
American Cancer Society, California Division
American Federation of State, County and Municipal
Employees, AFL-CIO
Asian Americans for Civil Rights and Equality
Asian Pacific American Legal Center
Black Women for Wellness
California Academy of Family Physicians
California Black Health Network
California Labor Federation
California Partnership
California Rural Legal Assistance Foundation
California Teachers Association
CALPIRG
Coalition for Humane Immigrant Rights of Los Angeles
Dream Team Los Angeles
The Greenlining Institute
Having Our Say
Health Access California
Korean Resource Center
Latino Coalition for a Healthy California
Madera Coalition for Community Justice
National Health Law Program
Planned Parenthood Advocacy Project Los Angeles County
San Diegans for Healthcare Coverage
Services, Immigrant Rights and Education Network
Social Action Partners
Street Level Health Project
UC Davis Comprehensive Cancer Center Outreach Research
& Education Program
Westchester Democratic Club
Western Center on Law & Poverty
Worksite Wellness LA
Three individuals
Oppose: Association of California Life and Health Insurance
Companies
California Association of Health Plans
California Association of Health Underwriters
California Chamber of Commerce
California Psychological Association
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Insurance Brokers and Agents of the West
Kaiser Permanente
National Association of Insurance and Financial
Advisors - California
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