Commissioner of Insurance Archives - Page 2 of 4

Long-term care insurance covers long-term personal and custodial care services, including in a variety of settings such as your home, a community organization or other facility. Long-term care insurance policies reimburse policyholders a daily amount (up to a pre-selected limit) for services to assist them with their activities of daily living when they are unable to perform these activities.

Individuals who have these policies do not currently receive periodic notification from their insurer that these benefits are available. Without notification, these individuals and their families can easily lose track of the existence of the benefits, especially if the insured suffers from cognitive impairment. These individuals and families likely end up paying for care despite having this insurance or doing without when, in fact, benefits are available.

Recently, Governor Brown signed Senate Bill 575, authored by Senator Carol Liu. Sponsored by Insurance Commissioner Dave Jones, the new law requires long-term care insurers to provide annual notification of the availability of non-forfeiture benefits and contingent benefits to the insured and the insured’s designated backup contact. This notification will give seniors and their loved ones a clearer understanding of benefits available to them. Here is the press release from the California Department of Insurance:

Seniors gain greater consumer protections under new law

SACRAMENTO, Calif.- New consumer protections were ushered in yesterday when Governor Brown signed Senate Bill 575, authored by Senator Carol Liu. Sponsored by Insurance Commissioner Dave Jones, the new law protects consumers, specifically the elderly and their caregivers by requiring long-term care insurers to provide annual notification of the availability of nonforfeiture benefits and contingent benefits to the insured and the insured’s designated backup contact.

“This notification will give seniors and their loved ones a clearer understanding of benefits available to help finance and provide long-term care,” said Commissioner Jones. “Without notification, individuals and their families can easily lose track of the existence of the benefits and may end up paying for care or missing out on benefits that are available to them. I would like to thank Senator Liu for authoring this important bill.”

Consumers may stop making premium payments because they can no longer afford them. Although the long-term care benefits may still be available to the consumer even after they stop making payments, the benefits may not be utilized by the consumer until years after the policy has lapsed, which is why consumers may forget the benefits are available for use.

SB 575 earned strong bipartisan support in the Legislature and was supported by the Congress of California Seniors, California Advocates for Nursing Home Reform, the California Commission on Aging, California Retired Teachers Association, California Health Advocates, the American Federation of State, County, and Municipal Employees, National Association of Social Workers, and the Arc and United Cerebral Palsy California Collaboration.

Insurance Commissioner Dave Jones announced that during the 2014 legislative session that Governor Jerry Brown signed nine bills sponsored by the California Department of Insurance (“CDI”). A bill that adds protections for small businesses that took effect in 2014 and five other consumer protection bills that were implemented January 1, 2015. Here is a list of them (taken from a CDI bulletin):

SB 1273, authored by Senator Ricardo Lara (D-Bell Gardens) – Low Cost Auto Insurance Expansion

The signing of SB 1273 was the single most important action taken this year to reduce the number of uninsured vehicles on our roads. The law enhances the California Low Cost Auto program by allowing more low-income individuals the opportunity to purchase low cost auto insurance, most importantly the estimated 1.4 million newly-licensed undocumented individuals who may apply for licenses starting January 2015.

AB 1804, authored by Assembly Member Henry Perea (D-Fresno) – Back-up contact

Requires insurers to provide consumers the option to designate a third party as a back-up contact and receive notification from their insurance carrier if their policy is in danger of lapsing, expiring, being terminated or canceled due to nonpayment of premium. This new law benefits both insurers and consumers by promoting continual insurance among automobile, homeowners and disability income insurance policyholders, especially seniors and members of the military who move often or are deployed, and may unintentionally have their policies terminated due to nonpayment. This will take effect January 1, 2016.

SB 1446, authored by Senator Mark DeSaulnier (D-Concord) – Small business protections

This small employer health coverage urgency bill is a victory for all California small businesses. The new law provides small employers who need time to transition to Affordable Care Act compliant policies additional time to make the transition. Small employers with non-grandfathered health insurance coverage purchased by December 31, 2013 have the option to renew their existing coverage for one year, rather than be required to move to new coverage by December 2014.

AB 2056, authored by Assembly Member Matthew Dababneh (D-Encino) – Pet insurance

Under AB 2056 pet insurers are required to disclose important information regarding their policies, standardize definitions and provide consumers with a 30-day free look period. As of July 1, 2015, pet insurers will be required to disclose baseline information regarding their policies such as reimbursement benefits, pre-existing condition limitations and a clear explanation of limitations of coverage including coinsurance, waiting periods, deductibles and annual or lifetime policy limits.

AB 2347, authored by Assembly Member Lorena Gonzalez (D-San Diego) – Annuity disclosures

Consumer protection and helping seniors avoid possible financial hardship is paramount to the mission of the Department of Insurance. Seniors now have more protection with the new annuity disclosure requirements provided by AB 2347. The new law requires disclosure language on the front of the policy jacket or on the cover sheet for an immediate annuity that aligns with the disclosure language already required for the more common deferred annuity products. This bill will go into effect July 1, 2015.

AB 2128, authored by Assembly Member Richard Gordon (D-Menlo Park) – Community development investments

Reforms the California Organized Investment Network (COIN) Program to better focus on finding and facilitating insurance industry investments that provide economic and social benefits to California’s underserved communities. The new law requires insurers who write $100 million or more in California premium to provide information to the commissioner, by July 1, 2016, on all of its community development investments, including infrastructure and green investments, as well as streamlining reporting requirements. This bill also clarifies an important element of the law authorizing the insurance commissioner to survey insurers’ supplier diversity efforts, which is part of Commissioner Jones’ Insurance Diversity Initiative.

AB 2734, authored by the Assembly Committee on Insurance – Omnibus provisions

This omnibus bill clarifies and improves various sections of the Insurance Code, the body of law that provides for consumer protections and regulation of insurance companies. Specifically it provides the Locomotive Engineers and Conductors Mutual Protection Association (LECMPA) the authority to offer an accidental death benefit in addition to job protection insurance to their members. Railroad workers will gain an important insurance protection benefitting them and their families.

SB 1142, authored by Senate Insurance Chair Bill Monning (D-Carmel) – Insurance fraud

The law clarifies the annual fraud health and disability assessment to ensure CDI is able to continue its mission in ensuring a healthy and vibrant insurance marketplace by reducing fraud and working with local district attorneys.

AB 1234, authored by Assembly Member Marc Levine (D-San Rafael) – Confidentiality

Maintains the confidentiality of state investigations and examinations that monitor the financial health of insurance companies. The new law protects insurer solvency by precluding the Department of Insurance from being forced to provide sensitive financial data. This bill also clarifies an important element of the law authorizing the insurance commissioner to survey the supplier diversity efforts of insurance companies which is part of Commissioner Jones’ Insurance Diversity Initiative.

On Sunday December 14, 2014, CBS’ 60 Minutes program contained a segment entitled “Denied” which highlights that insurers routinely deny, based on lack of medical necessity, treatment for patients with mental illnesses, especially those for long-term in-patient care at mental health facilities. This segment was an indictment of health insurance companies’ actions (especially Anthem Blue Cross) to deny legitimate claims for such care, sometimes with tragic results. According to 60 Minutes, “we found that the vast majority of claims are routine but the insurance industry aggressively reviews the cost of chronic cases. Long-term care is often denied by insurance company doctors who never see the patient. As a result, some seriously ill patients are discharged from hospitals over the objections of psychiatrists who warn that someone may die.”

As we see all too often, insurers rely on their non-independent physician consultants, who are paid handsomely for their opinions, who render decisions favoring the insurers’ attempts to deny legitimate claims. These physician consultants do not see or physically examine the insureds, but rather perform a “peer review” or “paper review” based on a review of medical records and other information. These physicians typically attempt to contact the insured’s treating physicians to ask questions, but in reality use these “attempted” phone calls as a pretext to opinions against the insured’s interest (i.e., that the insured does not need additional mental health care) so that the insurer can deny these claims. This is very often done without giving the treating physician adequate time for a response. This is exactly what the 60 Minutes segment found.

This problem is so prevalent that when McKennon Law Group clients hire us to represent them to handle ERISA or non-ERISA insurance claim correspondence and appeals, we now instruct insurers that if they wish to contact our clients’ treating physicians, any communications between the insurer’s consulting physician and the treating physicians must be in writing, include only those questions that are pertinent to the claim and include a reasonable time to allow the treating physicians to adequately respond to the questions. This allows the treating physicians the time necessary to adequately respond to the questions in writing, with the benefit of allowing them to review the most recent medical records. All too often we have seen a scenario in which an insurer’s consulting physician makes a “cold call” to an insured’s treating physician without an appointment to speak to him or her in the midst of a busy practice schedule. This creates several problems. First, the treating physician may not be able to immediately take the call because he or she is treating patients. As a result, the insurer’s physician notes that the treating physician did not take his call and an implication is raised that the insured’s physician does not support the claim. Second, even if the treating physician is able to take the call, he or she may not be prepared to thoroughly discuss the claim or the restrictions and limitations without a review of his or her records. If pressed for answers regarding the date of last examination or clinical findings, the treating physician may, understandably, not be able to give complete or accurate answers. Of course, this does not stop the physician consultants and insurance companies from arguing that the treating physicians do not support the insured’s claim. Communication in writing alleviates these problems.

The real problem is that (as the CBS segment notes) doctors hired by the insurance companies are paid for each medical review they complete, and in many cases, the so-called independent physician consultants conduct hundreds of reviews per year for these insurers. They are thus economically motivated to render opinions that allow insurers to deny legitimate health insurance claims because they want repeat business.

California Insurance Commissioner Dave Jones commented on the 60 Minutes segment, stating that:

60 Minutes featured a story last night about Anthem Blue Cross’ denial of coverage for patients needing mental health treatment. “I am very pleased to see that 60 Minutes has brought national attention to our disputes with Anthem Blue Cross over their denial of coverage for mental health treatment,” said California Insurance Commissioner Dave Jones. “Medically necessary mental health treatment, including residential mental health treatment, is required to be covered under mental health parity laws.”

(Calif. Dept of Insurance, “Insurance Commissioner responds to 60 Minutes story about insurer denials of coverage for mental health treatment,” December 15, 2014)

State and federal mental health parity laws are in place to prevent health insurers from denying coverage for mental health care. California Insurance Code section 10144.5 requires health insurance policies to cover diagnosis and medically necessary treatment of severe mental illnesses for patients of all ages.

One issue not mentioned in the 60 Minutes segment is that insureds typically have a review or appeal process available to them. In order to navigate this complex area of the law, it is advisable that they seek out the advice of experienced attorneys in this area of the law when they are faced with insurance claim denials.

There is a commonly held belief that every disability insurance policy sold to the public has been actually reviewed and approved by the California Department of Insurance. Indeed, California Insurance Code section 10291.5 requires the Insurance Commissioner to reject a proposed new disability insurance policy form if it does not meet certain requirements set forth in the Insurance Code. However, prior to the recent ruling of Ellena v. Department of Insurance, 2014 Cal. App. LEXIS 883 (1st Dist. Oct. 1, 2014), the California Department of Insurance was not following this code provision, and in fact maintained that it did not have a duty to review each new disability insurance policy form. There is now no question that the Department of Insurance has a mandatory duty to review all new disability insurance policy forms that insurers wish to sell in California.

Cassaundra Ellena was an employee of the County of Sonoma who was insured under a group disability insurance policy sold and administered by Standard Insurance Company (“Standard”). Unfortunately, Ellena was diagnosed with lupus and was unable to continue working. Ellena filed a claim for long-term disability benefits with Standard, but Standard denied her claim, forcing Ellena to file a lawsuit to collect her disability benefits. Along with naming Standard as a defendant for various causes of action including breach of contract and bad faith (also known as the breach of the covenant of good faith and fair dealing), Ellena also named the California Department of Insurance as a defendant.

Ellena asserted a cause of action for mandamus against the Department of Insurance, alleging that the Department had a mandatory duty to review the policy to make sure it complied with California law before approving the policy. Ellena alleged that the policy was in violation of California law because it improperly allowed Standard to define “own occupation” as other than the one Ellena performed for the City of Sonoma, and also that the policy’s definitions of “disability” and “any occupation” were also improper.

The trial court granted the Department of Insurance’s demurrer, ruling that “Ellena had not sufficiently alleged a violation of a specific mandatory duty and that a writ of mandate could not be based on general enforcement provisions or statutes involving the DOI’s exercise of discretion.” The Department of Insurance was dismissed from the lawsuit, and Ellena timely appealed.

On appeal, a large focus of the Court of Appeals’ ruling turned on what exactly Ellena was seeking through her lawsuit. The Court of Appeals noted that “[w]hile a party may not invoke mandamus to force a public entity to exercise discretionary powers in any particular manner, if the entity refuses to act, mandate is available to compel the exercise of those discretionary powers in some way.” Ellena acknowledged that the Department of Insurance “has the discretion to decide whether to approve a policy, but maintains that the [Department of Insurance] must exercise that discretion by reviewing the policy to determine whether it does or does not comply with California law.” The Department of Insurance argued that the Insurance Code only requires that an insurance company submit its draft policy for review, but that it had no actual duty to review and approve the policy before it is sold to the public.

After reviewing the Insurance Code and characterizing the oversight function of the Department of Insurance as “a matter of great public interest,” the Court of Appeal ruled:

The clear language of this statute is that “[t]he commissioner shall not approve any disability policy for insurance or delivery …” unless it meets a number of requirements. (§ 10291.5, subd. (b), italics added.) “The commissioner shall require from every insurer a full compliance with all the provisions of this code” (§ 12926, italics added) and the commissioner has an obligation to fulfill the duties imposed by the Insurance Code under section 12921.5.

…

The plain meaning of these provisions is that the commissioner has a mandatory duty to review the policy prior to approving it and the commissioner must review the disability policy to ensure it meets the requirements set forth in section 10291.5, subdivision (b). The Insurance Code imposes on the commissioner the duty to review the policy to ensure it complies with the law.

The Court noted that if the Department of Insurance did not actually review each policy that was submitted for review, “how could the commissioner responsibly disapprove any disability policy containing provisions that are ‘unintelligible, uncertain, ambiguous, or abstruse, or likely to mislead a person to whom the policy is offered, delivered or issued,’ as required by subdivision (b) of [section 10291.5]?” The Court further noted the “legislative history to [the 1949 amendment to section 10291.5] supports the conclusion that the statute requires the commissioner to review the disability policy form prior to approving it.” Accordingly, the Court of Appeal concluded that “the Insurance Code requires that the commissioner review a disability policy form prior to approving the policy.”

This is a victory for consumers and policyholders as the Department of Insurance will now be required to review every potential disability policy before it is sold to the public. The Insurance Commissioner and Department of Insurance should now ensure that policies, such as the one sold to Ellena, are in compliance with California law. This decision is also of practical procedural significance to attorneys who engage in insurance litigation against insurers as naming the Department of Insurance will destroy diversity of citizenship jurisdiction thus precluding insurers from removing such cases to federal court.

Following an investigation conducted by the California Department of Insurance via a market conduct examination, as well as insurance regulators from Connecticut, Maine, Massachusetts and Pennsylvania, CIGNA and these states’ insurance regulators, reached a settlement over its improper handling of claims for long-term disability (“LTD”) insurance. This resulted in a Regulatory Settlement Agreement (“Agreement”) between CIGNA and its affiliates and these insurance regulators. The companies involved in the evaluation and settlement include CIGNA Health and Life Insurance Company (formerly known as Alta Health and Life), and Connecticut General Life Insurance Company, Life Insurance Company of North America (collectively, “CIGNA Companies”). In the examinations of CIGNA Companies, insurance department officials found that the CIGNA Companies engaged in numerous claim-handling irregularities, including not giving due consideration to the medical findings of independent physicians, discounting information provided by Social Security Disability decisions and not giving appropriate consideration to Workers’ Compensation records.

In addition to paying $500,000 penalty to the California Department of Insurance and $150,000 to reimburse the department for the cost of ongoing monitoring, the CIGNA Companies are settling aside $77 million for projected payments to policyholders potentially nation-wide whose claims were not handled properly. This money is being set aside for claims improperly handled between January 1, 2008 and December 31, 2010.

In addition to paying the fine and re-evaluating previously denied LTD claims, under the Agreement the companies are required to:

Enhance claim procedures to improve the claims handling process to benefit current and future policyholders.
Establish a remediation program in which the companies’ enhanced claim procedures will be applied to certain previously denied or adversely terminated claims.
Participate in a 24-month monitoring program, including random sampling and ongoing consultation by the five states’ insurance departments.
Undergo a re-examination upon completion of the monitoring period.
Pay fines and administrative fees totaling $1,675,000 to the five lead state states.

The “enhanced claims procedures” that the CIGNA Companies must implement include:

Procedures regarding the weight to be given to awards of Social Security Disability Income benefits;
Enhanced procedures regarding the gathering of medical information and the documentation of conclusions;
Guidelines/or Use of External Medical Resources (i.e., following guidelines when utilizing Independent Medical Examinations or Functional Capacity Evaluations and providing claims personnel and outside professionals (such as consulting physicians) with all available medical, clinical and vocational evidence, including both objective and subjective evidence of impairment);
Ongoing objectives (such as the CIGNA Companies’ claim procedures shall include focus on policies and procedures relating to medical and related evidence, as specifically described in the Agreement and clear and express notice to claimants of the information to be provided by the claimants and the information to be collected by the CIGNA Companies);
Selection of Evaluation Personnel;
Professional Certification; and
Providing Medical, Clinical, and/or Vocational Evidence.

The insurance regulators have implemented procedures to ensure that the CIGNA Companies comply with the “enhanced claims procedures” as described above.

If you had a LTD insurance clam denied by the CIGNA Companies, you may be entitled to a portion of the $77 million. It is irrelevant whether you purchased your own individual policy with your own money or if the disability insurance was provided by your employer (and is thus governed by ERISA). If your claim for disability benefits was denied by CIGNA, you should speak with an attorney as soon as possible to ensure that your claim if properly handled and that CIGNA has followed the special procedures required under the CIGNA Settlement Agreement. The McKennon Law Group PC is currently handling several CIGNA claims on behalf of claimants whose rights were violated when CIGNA’s unfair claims practices, as identified above, resulted in a denial of their disability and life insurance claims. If you would like to discuss your claim with an attorney, please contact us for a free consultation.

Insurance Commissioner Dave Jones last week announced that Governor Jerry Brown has signed AB 1747, authored by Assembly Member Mike Feuer (D-Los Angeles). The bill was strongly supported by Commissioner Jones and the California Department of Insurance and provides important consumer safeguards for life insurance policyholders. AB 1747, which will be effective January 1, 2013, adds new Sections 10113.71 and 10113.72 to the Insurance Code and will apply to every individual and group life insurance policy issued or delivered in California after January 1, 2013.

AB 1747 will require that every life insurance policy issued or delivered in this state contain a provision for a grace period of not less than 60 days from the premium due date and that the policy remains in force during the 60-day grace period. The law will also require an insurer to give the applicant for an individual life insurance policy the right to designate at least one person, in addition to the applicant, to receive notice of lapse or termination of a policy for nonpayment of premium. The law will require an insurer to provide each applicant with a form, as specified, to make the designation and to notify the policy owner annually of the right to change the designation. The law will also prohibit a notice of pending lapse and termination from being effective unless mailed by the insurer to the named policy owner, a named designee for an individual life insurance policy, and a known assignee or other person having an interest in the individual life insurance policy at least 30 days prior to the effective date of termination if termination is for nonpayment of premium.

The new statutes will read as follows:

The people of the State of California do enact as follows:

SECTION 1. Section 10113.71 is added to the Insurance Code, to read:

10113.71. (a) Every life insurance policy issued or delivered in this

state shall contain a provision for a grace period of not less than 60 days

from the premium due date. The 60-day grace period shall not run

concurrently with the period of paid coverage. The provision shall provide

that the policy shall remain in force during the grace period.

(b) (1) A notice of pending lapse and termination of a life insurance

policy shall not be effective unless mailed by the insurer to the named policy

owner, a designee named pursuant to Section 10113.72 for an individual

life insurance policy, and a known assignee or other person having an interest

in the individual life insurance policy, at least 30 days prior to the effective

date of termination if termination is for nonpayment of premium.

(2) This subdivision shall not apply to nonrenewal.

(3) Notice shall be given to the policy owner and to the designee by

first-class United States mail within 30 days after a premium is due and

unpaid. However, notices made to assignees pursuant to this section may

be done electronically with consent of the assignee.

(c) For purposes of this section, a life insurance policy includes, but is

not limited to, an individual life insurance policy and a group life insurance

policy, except where otherwise provided.

SEC. 2. Section 10113.72 is added to the Insurance Code, to read:

10113.72. (a) An individual life insurance policy shall not be issued or

delivered in this state until the applicant has been given the right to designate

at least one person, in addition to the applicant, to receive notice of lapse

or termination of a policy for nonpayment of premium. The insurer shall

provide each applicant with a form to make the designation. That form shall

provide the opportunity for the applicant to submit the name, address, and

telephone number of at least one person, in addition to the applicant, who

is to receive notice of lapse or termination of the policy for nonpayment of

premium.

(b) The insurer shall notify the policy owner annually of the right to

change the written designation or designate one or more persons. The policy

owner may change the designation more often if he or she chooses to do

so.

(c) No individual life insurance policy shall lapse or be terminated for

nonpayment of premium unless the insurer, at least 30 days prior to the

effective date of the lapse or termination, gives notice to the policy owner

and to the person or persons designated pursuant to subdivision (a), at the

address provided by the policy owner for purposes of receiving notice of

lapse or termination. Notice shall be given by first-class United States mail

within 30 days after a premium is due and unpaid.

SEC. 3. Section 10173.2 of the Insurance Code is amended to read:

10173.2. When a policy of life insurance is, after the effective date of

this section, assigned in writing as security for an indebtedness, the insurer

shall, in any case in which it has received written notice of the name and

address of the assignee, mail to the assignee a written notice, postage prepaid

and addressed to the assignee’s address filed with the insurer, not less than

30 days prior to the final lapse of the policy, each time the policy owner

has failed or refused to transmit a premium payment to the insurer before

the commencement of the policy’s grace period or before the notice is

mailed. The insurer shall give that notice to the assignee in the proper case

while the assignment remains in effect, unless the assignee has notified the

insurer in writing that the notice is waived. The insurer shall be permitted

to charge the policy owner directly or against the policy the reasonable cost

of complying with this section, but in no event to exceed two dollars and

fifty cents ($2.50) for each notice.

As used in this section, “final lapse of the policy” means the date after

which the policy will not be reinstated by the insurer without requiring

evidence of insurability or written application.

As the Insurance Commissioner has noted, under existing law, individuals can easily lose the critical protection of life insurance if a single premium is accidentally missed, even if they have been paying premiums on time for many years. Furthermore, if an insured individual loses coverage and wants it reinstated, he or she may then have to undergo a new physical exam and be underwritten again, risking a significantly more expensive, possibly unaffordable premium if his or her health has changed in the years since purchasing the policy. Worse yet, they will not qualify for coverage at all under the insurers’ standards in place for reinstating coverage because of health changes. Over the years, we have observed that insurers have improperly lapsed life insurance policies without complying with existing law and even in situations where they have complied with the law, insurance company agents have not properly notified/warned policyholders of the impending lapse. Our office has been involved in a significant amount of litigation with insurers and their agents over improper life insurance policy lapses (last week one of the cases settled for just under $500,000). We expect that this law will make significant strides in reducing the amount of litigation over this issue.

California Seniors Gain Protection Under Long-Term Care Policies

Seniors gain greater consumer protections under new law

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