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Consumer Protection Insurance Bills Sponsored by Insurance Commissioner Jones Clear Hurdles

An important package of strong consumer protection bills, sponsored by Insurance Commissioner Dave Jones, passed through their respective houses of the Legislature, clearing a major hurdle toward passage.  Jones stated in his recent press release:

“When I took office in January, I vowed we would work to strengthen our consumer protection laws,” said Commissioner Jones.  “I applaud the authors of the bills I am sponsoring, which protect the rights of consumers and expand the opportunity to purchase and keep insurance. I will continue to work toward ensuring these important pieces of legislation win final passage and become law in order to protect the consumers, vulnerable seniors, and hard-working families of this state.”

The package of Assembly bills includes:

AB 52, which would give the Insurance Commissioner the power to reject excessive health insurance rate increases by requiring health plans and insurers to seek approval from state regulators prior to raising health care premiums, copayments, or deductibles, passed on a vote of 44-27. The bill is jointly authored by Assembly Judiciary Chair Mike Feuer and Assembly Water, Parks and Wildlife Committee Chair Jared Huffman and now moves to the Senate.

AB 315, which would incorporate provisions of the federal Dodd-Frank Wall Street Reform and Protection Act into California law relating to the business and taxation practices of surplus lines of insurance, passed on a vote of 78-0. The bill is authored by Assembly Insurance Committee Chair Jose Solorio and now moves to the Senate Insurance Committee. The bill is an urgency measure and must be enacted by July 21, 2011, to avert federal preemption of California’s surplus lines of activities.

AB 624, which would extend the sunset date to January 1, 2017 on an on-going tax credit program for insurance companies, corporations, and other taxpayers that invest in Community Development Financial Institutions certified by the Department of Insurance’s California Organized Investment Network, passed on a vote of 75-2. The bill is authored by Assembly Speaker John A. Pérez and now moves to the Senate.

AB 689, which would require insurance producers and insurers selling annuities to have reasonable grounds to believe their recommendations are suitable for seniors and consumers and to adopt a comprehensive regulatory process at the Department of Insurance to enforce this new standard, passed on a vote of 79-0. The bill is authored by Assembly Budget Committee Chair Bob Blumenfield and now moves to the Senate Insurance Committee.

AB 793, which would prohibit unscrupulous insurance professionals from participating with, employing, or making referrals to an individual involved in the sale of reverse mortgages with the sole purpose of selling insurance policies and annuities in order to provide further financial protection to seniors, passed on a vote of 70-0. The bill is authored by Assembly Banking and Finance Committee Chair Mike Eng and now moves to the Senate Insurance Committee.

AB 999, which would protect consumers from excessive premium rate volatility that has characterized the long-term care insurance market by modifying the long-term insurance premium rate development process, passed on a vote of 42-33. The bill is authored by Assembly Aging and Long-Term Care Committee Chair Mariko Yamada and now moves to the Senate.

AB1416, which is the annual omnibus bill for the Department of Insurance and makes minor and technical changes to various code sections, passed on a vote of 75-0. The bill is authored by the Assembly Insurance Committee and now moves to the Senate.

The package of Senate bills includes:

SB 51, which would implement broader protections for California consumers in the large group, small group, and individual markets by conforming California law to the federal medical loss ratio and rebate requirements as well as to the federal prohibitions against annual and lifetime dollar limitations on essential health benefits, passed on a vote of 25-15. The bill is authored by Senator Elaine Alquist and now moves to the Assembly.

SB 599, which would protect consumers from being unwittingly enrolled in life insurance “retained asset accounts” by ensuring that beneficiaries have an opportunity to decide how they want their life insurance proceeds paid, passed on a vote of 37-1. The bill is authored by Senate Appropriations Committee Chair Christine Kehoe and now moves to the Assembly.

SB 621, which would prohibit disability insurance policies from containing discretionary clauses that give discretionary authority to insurers to determine eligibility for benefits or coverage insofar that these clauses give so much power to insurance companies that they can easily justify their denial of benefits in court even when the medical evidence overwhelmingly supports the case of the disabled policyholder, passed on a vote of 37-0. The bill is authored by Senate Insurance Committee Chair Ron Calderon and now moves to the Assembly Insurance Committee.

SB 684, which would provide another level of protection for businesses by making workers’ compensation policies more transparent, requiring that these policies be subject to California law, and prohibiting the practice of unfiled collateral agreements often used by insurers to gain the advantage in arbitrations of disputes, passed on a vote of 23-13. The bill is authored by Senate Majority Leader Ellen Corbett and now moves to the Assembly Insurance Committee.

SB 712, which would incorporate the essential elements of the National Association of Insurance Commissioners (NAIC) Model Law relating to Property and Casualty Actuarial Opinion into California law to ensure that the Department of Insurance retains its NAIC accreditation status, passed on a vote of 39-0. The bill is authored by the Senate Insurance Committee and now moves to the Assembly.

On April 25, 2011, California Insurance Commissioner Dave Jones and California State Controller John Chiang announced that they are investigating Metropolitan Life Insurance Company (“MetLife”) for a failure to pay out life insurance benefits after learning of an insured’s death.  It appears that while MetLife learned of its insured’s deaths through a database prepared by the Social Security Administration called “Death Master,” which lists all Americans who die, MetLife failed to use this information to pay legitimate claims.

As noted in the California Department of Insurance’s Press Release:

The Commissioner and the Controller are responding to preliminary findings from an audit the Controller launched in 2008, indicating that for two decades, MetLife failed to pay life insurance policy benefits to named beneficiaries or the State even after learning that an insured had died. The company has a huge number of so-called Industrial Policies, valued at an estimated $1.2 billion, which were primarily sold in the 1940s and 1950s to working-class people. The payments, which were collected weekly, typically were higher than the final death benefit. The Controller’s unclaimed property audit indicates that MetLife did not take steps to determine whether policy owners of dormant accounts are still alive, and if not, pay the beneficiaries, or the State if they cannot be located.

In addition, the preliminary findings revealed that MetLife may have similarly failed to contact the owners of annuity contracts:

Simultaneously, the preliminary findings show, when MetLife knew that an owner of an annuity contract – which generates income for the policy owner at the time the annuity matures – had died, or the annuity had matured, the company did not contact the policy holder or beneficiary, even though it subscribed to the “Death Master” database. Furthermore, MetLife continued making premium payments from the policy holder’s account until the cash reserves were used up, and then cancelled the contract.

While Monday’s press release was limited to the State’s investigation of MetLife, both the “Commissioner and Controller believe that these practices are not isolated, but are systemic in the insurance industry.”

If you believe you have a life insurance policy or annuity issued by MetLife, or any other insurer, for which you have failed to properly receive life insurance benefits, contact McKennon Law Group PC for a free consultation.

On September 23, 2010, the Patient Protection and Affordable Care Act, part of the recently enacted health care reform law, went into effect for insurance plans that begin on or after this date.  Health care reforms beginning Sept. 23, 2010 include:

  • No pre-existing condition exclusions for children under age 19: requires insurers to cover children of insured patients. “Grandfathered health plans” established before March 23, 2010, may continue their existing policy until 2014, at which time all health insurance discrimination based on pre-existing conditions are prohibited.
  • No arbitrary rescissions of health insurance: insurers cannot rescind policies except in cases of patient fraud or intentional misrepresentation. All health insurers are subject to this new rule.
  • No lifetime limits on health insurance coverage: The new provision prohibits lifetime limits on any plan issued or renewed after Sept. 23.
  • No annual limits on coverage: Similarly, annual limits will be gradually phased out. Initially, health insurance plans will not be able to set annual limits lower than $750,000 per year. That minimum limit rises to $1,250,000 next year on Sept. 23, 2011, and $2,000,000 the following year. Beginning Jan 1, 2014, annual limits will be prohibited for most health plans.
  • Protecting choice of health care provider: Patients will have the option to select and keep a primary care doctor from among the insurance company’s participating provider network.
  • Adult children covered to age 26. Children will have extended access to health insurance coverage under their parents’ health insurance plan until age 26, unless they qualify for health insurance through their employer.

Other reforms gradually become effective until 2014 when all provisions of the new health care act go into effect.  Last week, Insurance Commissioner Poizner shared useful tips and information with consumers about the impact of the Patient Protection and Affordable Care Act provisions. Here it is:

Commissioner Poizner Offers Tips to Consumers About the Impact
of Federal Health Care Provisions Going Into Effect Today

Insurance Commissioner Poizner today shared useful tips and information with consumers about the impact of the most recent Patient Protection and Affordable Care Act (PPACA) provisions which go into effect today.

“There are many new provisions of the federally-passed health care reform bill, and they can be difficult to interpret,” said Commissioner Poizner. “Here are some tips and guidelines to help consumers understand how this federal legislation will directly impact them. And if anyone has a question about their health insurance, they can call our Consumer Hotline at 800-927-HELP.”

Commissioner Poizner offered the following tips to California consumers:

Coverage Changes

  • Annual and Lifetime Limits – At the new plan year, plans may not contain lifetime limits on essential benefits. This provision applies to all plans. Annual limits will be phased out through 2014 for most plans. Check with your insurance company to see if this applies to your policy before you renew.
  • Rescissions – Rescission is when an insurance company retroactively cancels your policy. The PPACA bans rescissions except in cases of fraud or intentional misrepresentation of material fact. You must be notified prior to the cancellation. This provision applies to all types of health insurance plans.
  • Preventive Health Services – A wide range of preventive care including immunizations, well baby and child screenings, and well women exams must be covered without cost-sharing. For an exact list of what preventive services are available without cost-sharing, contact your insurance company.
  • Adult Dependent Coverage – Plans that cover dependent children must extend coverage until the child’s 26th birthday. This applies to all types of plans, however before 2014, group health plans will be required to cover adult children only if the adult child is not eligible for employer-sponsored coverage. Adult children cannot be charged more than any other dependent.
  • Preexisting Condition Exclusions – Beginning Sept. 23, 2010, children under 19 years of age cannot be denied coverage or benefits based on medical status or past illnesses. This applies to most plans including individual plans.

Consumer Protection Changes

Primary Care/Preapproval -Plans must:

  • Allow you the choice of any primary care provider available (if you are required to designate a primary care physician).
  • Provide covered emergency services without prior approval, regardless of whether the provider is in-network.
  • Limit cost-sharing on emergency services by nonparticipating providers to the same amount as that of a participating provider.
  • Allow female patients to receive obstetric or gynecological care from a participating provider and treat their authorizations the same as that of a primary care provider.
  • Allow children to receive care from a participating pediatrician and treat their authorizations the same as that of a primary care provider.

Effective Date

  • The changes beginning Sept. 23 include expanded coverage and new consumer protections. If they are not spelled out in the documentation you receive from your insurance provider or employer, talk with your employer’s plan administrator or your health insurance company about how these protections will apply to your coverage and what new options you may have.
  • If you have health insurance coverage through an employer, these new benefits and protections will be added to your policy at the next policy renewal after Sept. 23.
  • If you purchased an individual health insurance policy on your own, the effective date is a bit more complicated. If your insurer has specified a “policy year” for your coverage, the new provisions will become effective on that date. Otherwise, the new benefits and protections will be added on the date when annual deductibles and annual limits reset each year. If your policy does not have an annual deductible or annual limit, these changes will become effective on Jan. 1, 2011. If you have questions about when these provisions will become effective for your policy, contact your insurance company.

You can also find more information about the PPACA and how it will affect you today and in the future on the National Association of Insurance Commissioners website by going to the special health reform section at http://www.naic.org/index_health_reform_section.htm. Here you’ll find the latest information on the PPACA implementation; an FAQ for consumers, employers and seniors on the health care reform; timelines for implementation and much more.

On July 19, 2010, Insurance Commissioner Poizner promulgated regulations designed to limit the practice of rescissions in the health insurance industry.  See our blog article, New Regulations Take Aim at Policy Rescissions, on this.  Last Monday, an insurance industry trade group filed a lawsuit in San Francisco to block the regulations, which would have been effective August 18, 2010.  Poizner commented on the lawsuit stating:  “I find it unconscionable that insurers would sue to keep the Department from stopping the horrific practice of illegal rescissions[.] Sometimes I think representatives in this industry have their heads permanently stuck in the sand. Illegal rescissions are a repugnant industry practice. In this current environment, this lawsuit is simply short-sighted and morally wrong.”  The Association of California Life and Health Insurance Companies says the new rules would impose new costs and inconveniences on consumers and are unnecessary.

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