BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1142|
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UNFINISHED BUSINESS
Bill No: SB 1142
Author: Monning (D)
Amended: 6/19/14
Vote: 21
SENATE INSURANCE COMMITTEE : 11-0, 4/24/14
AYES: Monning, Gaines, Corbett, Correa, DeSaulnier, Lieu,
Mitchell, Nielsen, Roth, Torres, Vidak
SENATE FLOOR : 36-0, 5/1/14
AYES: Anderson, Berryhill, Block, Cannella, Corbett, Correa, De
Le�n, DeSaulnier, Evans, Fuller, Gaines, Galgiani, Hancock,
Hernandez, Hill, Hueso, Huff, Jackson, Knight, Lara, Leno,
Lieu, Liu, Mitchell, Monning, Morrell, Nielsen, Padilla,
Pavley, Roth, Steinberg, Torres, Vidak, Walters, Wolk, Wyland
NO VOTE RECORDED: Beall, Calderon, Wright, Yee
ASSEMBLY FLOOR : 74-1, 8/7/14 - See last page for vote
SUBJECT : Health insurance fraud: annual special purpose
assessments
SOURCE : California Department of Insurance
DIGEST : This bill requires that the annual special purpose
assessment be paid for each person in this state covered under
an individual or group policy regardless of the situs of the
contract or master group policyholder, and regardless of whether
the insured has been issued an individual certificate of
coverage, and including blanket insurance. This bill also
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requires that the data supporting the special purpose assessment
not be required to be submitted more often than once each
calendar year, except that responses to questions from the
commissioner and clarifying information regarding the data would
not be considered as additional submissions of data.
Assembly Amendments require that the assessment be paid for each
person in this state covered regardless of whether the insured
has been issued an individual certificate of coverage, and
including blanket insurance. Amendments also require that the
data supporting the special purpose assessment not be required
to be submitted more often than once each calendar year, except
that responses to questions from the commissioner and clarifying
information regarding the data would not be considered as
additional submissions of data and authorize, for group and
blanket insurance contracts, insurers to rely on information
requested from and provided by the group policyholder after a
reasonable effort to obtain timely and accurate information.
ANALYSIS : Existing law:
1.Provides for the regulation of disability insurers by the
Insurance Commissioner.
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 $0.20 per
year for each insured under an individual or group policy "it
issues in this state" in order to fund increased investigation
and prosecution of fraudulent disability insurance claims.
3.Provides that after incidental expenses, 30% of the funds
received shall be distributed to the Fraud Division of the
Department of Insurance for enhanced investigative efforts,
and 70% shall be distributed to local district attorneys for
investigation and prosecution of disability insurance fraud
cases.
4.Defines blanket insurance as a form of insurance that provides
coverage for specified circumstances as defined, and insured
by description of all or nearly all persons within a class of
persons defined in a policy to a master policyholder, and not
by naming the persons covered, and for which a certificate of
coverage may or may not be provided to eligible persons.
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5.Authorizes the above-described blanket policies, among others,
to provide that the cost of the insurance coverage is required
to be paid by either the policyholder, or the individuals
insured or their parents or guardians, payable through the
policyholder.
6.Authorizes the person insured, when the premium is paid for
these types of blanket insurance, to request a copy of the
policy from the insurer.
Existing regulations:
1.Require each admitted disability insurer to pay a disability
insurance fraud assessment of $.20 for each insured person
that is covered by an individual or group disability insurance
policy issued in this state during each calendar year or any
part thereof.
2.Provide that an insured person for these purposes is deemed to
include any person that is issued an individual certificate of
coverage.
This bill:
1.Requires that the annual special purpose assessment be paid
for each person in this state covered under an individual or
group policy regardless of the situs of the contract or master
group policyholder, and regardless of whether the insured has
been issued an individual certificate of coverage, and
including blanket insurance.
2.Requires that the data supporting the special purpose
assessment not be required to be submitted more often than
once each calendar year, except that responses to questions
from the commissioner and clarifying information regarding the
data would not be considered as additional submissions of
data.
3.Requires that for group and blanket insurance contracts,
insurers may rely on information requested from and provided
by the group policyholder after a reasonable effort to obtain
timely and accurate information.
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Background
The disability Insurance fraud assessment was enacted in 1991 to
fund investigation and prosecution activities related to health
insurance claims fraud. According to SB 894 (Chapter 1008,
Senate Committee on Insurance, Claims and Corporations, Statutes
of 1991) the Legislature found that "health insurance fraud is a
particular problem for health insurance policyholders and is
believed to account for billions of dollars annually in added
costs of health care nationally. Premium dollars are lost and
health care costs increase unnecessarily."
The assessment was increased by AB 2138 (Chapter 444,
Blumenfield, Statutes of 2012) from $.10 to $.20 per covered
individual, and the percentage of the fund granted to district
attorneys was increased from 50% to 70%. The IC is to apportion
funding to district attorneys based on criteria, including a
high probability of successful prosecutions. In Fiscal Year
2011-12, five counties received a total of $1,712,000 in funding
through the Disability and Healthcare Insurance Fraud Grant
Program. The district attorneys reported 124 investigations, 48
arrests, and 43 convictions. Chargeable fraud amounted to
$210,691,543 with $2,456,180 restitution ordered by the courts.
As a result of the fee increase enacted in 2012, local district
attorney funding increased to $6,671,000 for Fiscal Year
2013-14. Ten counties received awards this cycle, including
Orange County which received $2.02 million, Los Angeles County
which received $1.07 million, and San Diego County which
received $875,000.
CDI has interpreted the statute to mean that the assessment is
to be applied to all covered persons residing in the state
regardless of whether the person is covered under an individual
or group policy regardless of the situs of the contract, and
including blanket policies.
CDI's Fraud Disability and Health Assessment Data Call instructs
companies to include blanket insurance in their covered lives
total for group plans. The instructions are as follows:
"Provide Covered Lives and Direct Earned Premium on group
policies that provide coverage, singly or in combination, for
death, dismemberment, disability or hospital and medical care
caused or necessitated as a result of accident or specified
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kinds of accidents. Types of coverage include: sports accident,
travel accident, blanket accident, specific accident or
accidental death or dismemberment."
According to CDI, many insurers have routinely paid the
assessment on covered California residents, regardless of the
situs of the contract, and on blanket policies where no
individual certificates had been issued. Recently, however,
some insurers have challenged the obligation to pay the
assessment on California residents who are covered under a group
policy not issued within California, or individuals covered
under a blanket insurance policy when the individuals are not
issued individual certificates of coverage. The increase in the
fee may have prompted some insurers to more closely examine the
statute and determine they could legally argue they were not
obligated to pay under a strict reading of the language
regarding both situs of the contract, and issuance of individual
certificates under blanket insurance master policies. CDI is
concerned that such an interpretation would dramatically reduce
the funds available to investigate and prosecute fraudulent
health and disability claims.
Prior Legislation
AB 1401 (Aghazarian, Chapter 335, Statutes of 2007) increased
the maximum per company general assessment CDI may annually
charge insurance companies to combat insurance fraud from $1,300
to $5,100.
AB 2138 (Blumenfield, Chapter 444, Statutes of 2012) increased
the maximum annual special purpose assessment on disability
insurers to investigate health insurance fraud from $.10 to $.20
annually for each insured under an individual or group insurance
policy it issues in this state to fund increased investigation
and prosecution of fraudulent disability insurance claims.
AB 2084 (Solorio, Chapter 321, Statutes of 2012) expanded the
types of blanket insurance that may be offered by
California-admitted insurers.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 8/8/14)
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California Department of Insurance (source)
California District Attorneys Association
Alameda County District Attorney
San Diego County District Attorney
Santa Clara County District Attorney
NCFIA Anti-Fraud Alliance
ARGUMENTS IN SUPPORT : According to CDI, the changes made by
this bill are necessary to more closely align the statute with
the original intent, CDI's current practice, and provide further
clarification for insurers who are subject to this assessment.
In addition, the proposed change would ensure that CDI has the
resources to continue investigating and prosecuting fraudulent
disability claims, which can occur in California regardless of
where a group policy is issued.
ASSEMBLY FLOOR : 74-1, 08/07/14
AYES: Achadjian, Alejo, Ammiano, Bigelow, Bloom, Bocanegra,
Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon,
Campos, Chau, Ch�vez, Chesbro, Conway, Cooley, Dababneh, Daly,
Dickinson, Eggman, Fong, Frazier, Beth Gaines, Garcia, Gatto,
Gomez, Gonzalez, Gordon, Gorell, Gray, Grove, Hagman, Hall,
Harkey, Roger Hern�ndez, Holden, Jones, Jones-Sawyer, Levine,
Linder, Logue, Lowenthal, Maienschein, Medina, Melendez,
Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson,
Perea, John A. P�rez, V. Manuel P�rez, Quirk, Quirk-Silva,
Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting,
Wagner, Waldron, Weber, Wieckowski, Wilk, Williams, Yamada,
Atkins
NOES: Allen
NO VOTE RECORDED: Dahle, Donnelly, Fox, Mansoor, Vacancy
AL:nl 8/8/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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