Legislation Archives - Page 2 of 6

Dave Jones Reveals the Priorities for His Tenure as California’s Insurance Commissioner

California’s new Insurance Commissioner, Dave Jones, identified his priorities at his inauguration on January 3. He plans to accomplish his objectives by making the California Department of Insurance “the strongest consumer protection agency in the nation”, and he plans to “set the standard for other consumer protection agencies.” His priorities are:

Implementation of federal health care reform, and that includes continuing his fight for the authority to reject excessive health insurance premium increases;
“[T]o level the playing field for consumers and business as they deal with insurance companies . . . to make sure that consumer complaints are being addressed and that insurance companies are not taking advantage of consumers;”
Ensuring that California has a viable and competitive insurance market.

To implement his first priority, Jones has created a new senior leadership position titled “Deputy Commissioner for Health Care Policy and Reform.” He will also continue efforts to provide the “Insurance Commissioner and the Department of Managed Health Care the legal authority to reject excessive health insurance and managed care premiums,” and he will see to it that he has the “legal authority to enforce the new federal health care reform law.” Jones has already signed anemergency regulation giving him the authority to enforce in “California, the new federal 80% medical loss ratio for the individual health insurance market.” Existing California law requires insurers to spend at least 70% of premiums from the individual market on medical care. Jones’ proposal aligns California’s regulations with national Medical Loss Ratio rules established under the federal health reform law. The federal MLR regulations took effect on January 1, 2011.

To succeed in the protection of consumers, Jones has directed the Department of Insurance to file by January 30, 2011 “annuity suitability” regulations aimed to “protect consumers from being sold annuities that are not suitable for them.” Additionally Jones has directed the Department of Insurance to develop regulations to protect “life insurance beneficiaries from the abusive use of retained asset accounts.”

To ensure California has a functioning and competitive insurance market, Jones wants to see new products brought to consumers in California. “Consumers and businesses need choices, and keeping a viable, robust market, with competition, is important.”

Jones also feels that it is “essential that we root out fraud, which is a burden on the market, insurer and consumers alike – fraud by policy-holders, fraud by scam artists, fraud by vendors, and fraud by insurers and agents who promise one thing and deliver another – or don’t’ deliver at all.”

The next four years under Insurance Commissioner Jones promises to be one of the most consumer oriented terms ever in California. It will be interesting to see how the insurance industry responds to him and his proposals.

California’s Office of Administrative Law Approves Homeowners Underinsurance Regulations

Because of fairly recent California wild fires and California’s history of rising property values (at least this was the case a few years ago), many California homeowners have found themselves underinsured for fire losses. The California Department of Insurance has been considering new regulations governing standards and training for estimating replacement value on homeowners’ insurance for some time. California Insurance Commissioner Steve Poizner had previously called for regulations that would provide more comprehensive and reliable estimates of what it might cost to completely rebuild a destroyed home. Such estimates were previously unregulated and led homeowners to believe they needed less coverage than they truly did in the event of a disaster.

Poizner announced last week that his new regulations designed to combat underinsurance were approved by the Office of Administrative Law on December 29, 2010. The regulations will take effect June 27, 2011.

The Regulations:

Require all California resident fire and casualty broker-agents and personal lines broker-agents, who have not already done so, to satisfactorily complete one three-hour training course on homeowners’ insurance valuation prior to estimating the replacement value of structures in connection with, or explaining the various levels of coverage under, a homeowners’ insurance policy;
Require insurers, agents and brokers that provide replacement cost estimates to applicants and insureds to document who created the estimate and the sources or methods used to create the replacement cost estimate; and
Require that all replacement cost estimates communicated to applicants or insureds be complete, based upon specifically enumerated standards set forth in the regulations.

The Regulations represent the final phase of Poizner’s plan to reduce underinsurance.

California’s Largest Health Insurers are Fined by California Department of Managed Health Care for Inadequate Claims Practices

In today’s Los Angeles Times Business Section, Duke Helfand writes about an 18-month investigation by the California Department of Managed Health Care into the payment practices of Aetna Inc., Anthem Blue Cross of California, Blue Shield of California, Cigna Corp., Health Net Inc., Kaiser Foundation Health Plan and United Healthcare/PacifiCare.

Here is his article:

California’s largest health plans are fined nearly $5 million

The seven companies failed to properly pay medical claims submitted by thousands of doctors and hospitals over the last three years, state insurance regulators say.

California’s seven largest health plans were fined nearly $5 million in total Monday for failing to properly pay medical claims submitted by thousands of doctors and hospitals over the last three years.

Insurance regulators said the companies also would pay “tens of millions of dollars” in restitution to medical providers whose claims were underpaid or incorrectly rejected.

The fines cap an 18-month investigation by the California Department of Managed Health Care into the payment practices of Aetna Inc., Anthem Blue Cross of California, Blue Shield of California, Cigna Corp., Health Net Inc., Kaiser Foundation Health Plan and UnitedHealthcare/PacifiCare.

“California’s hospitals and physicians must be paid fairly and on time,” Cindy Ehnes, the state department’s director, told a Los Angeles news conference. “The incorrect payment of provider claims by plans unfortunately is a persistent issue.”

Hospitals said Monday’s action would send a loud message across California’s multibillion-dollar insurance industry.

“In levying these fines, [the state] is addressing an ongoing, systemic issue that harms the ability of providers to care for their patients,” said Jan Emerson-Shea, a spokeswoman for the California Hospital Assn.

But doctors blasted the fines, saying they were a “slap on the wrist.” James Hinsdale, president of the California Medical Assn., called the penalties “chump change … for highly profitable health plans that systematically deny legitimate claims and routinely block, delay or limit physician reimbursements as one tactic to boost their bottom lines.”

The state agency reviewed samples of claims after providers who serve members of health maintenance organizations complained about problems. Auditors said none of the plans met a state legal requirement to pay 95% of their claims correctly. More than 21 million Californians have HMO coverage.

The reviews also found that most of the health plans lacked adequate procedures for settling disputes with providers. In some cases, health plan workers responsible for processing claims also oversaw appeals.

The trade group for health plans said the companies would work with state regulators to improve their performance. But the California Assn. of Health Plans also seized on a piece of positive news from regulators: The fined firms generally met state requirements for paying claims on time.

“We have long recognized that the administrative side of healthcare coverage can take valuable time away from patient care, which is why plans have been working to streamline processes both at the health plan level and in doctors’ offices,” said Patrick Johnston, the association’s president.

Only two health plans commented on the state’s action.

Kaiser spokesman Won Ha said the plan, which is based in Oakland, had taken steps to improve its processing of claims in a “timely and accurate manner,” although he did not provide details.

“We continue to build on our progress to meet the high standards of the Department of Managed Health Care and other regulators,” Ha said. “We are committed to achieving or exceeding all regulatory and customer requirements.”

Connecticut-based Aetna acknowledged problems with its payment procedures and said it took immediate action once regulators informed the company of its findings. Aetna pointed out that its penalty — $300,000 — was the lowest of those imposed on the seven health plans.

“Aetna takes our responsibilities to our members and providers very seriously, but we do sometimes make mistakes,” spokeswoman Anjanette Coplin said.

Anthem Blue Cross, a unit of Indianapolis-based WellPoint Inc., and Blue Shield of California received the largest fines — $900,000 each. UnitedHealthcare/PacifiCare was penalized $800,000. Health Net and Kaiser were fined $750,000 each, and Cigna was assessed $450,000.

State regulators said the size of the fines was determined by the volume of each plan’s business in California and the severity of its violations.

The health plans also must compensate providers for money they are owed, including penalties and interest, within six months. The plans must reopen their records dating back two to three years to their last financial review by the state.

Hospitals are likely to receive the largest share of the money because they submit bigger bills than doctors.

The restitution is the latest good news for some hospitals. Last month, regulators from the managed care department said that seven facilities would divvy up $1.62 million from Anthem Blue Cross to resolve unrelated allegations that the health plan improperly reimbursed the providers for patient costs that exceeded daily hospital rates. Anthem admitted no wrongdoing in the case.

By: Duke Helfand (November 30, 2010)
Copyright © 2010, Los Angeles Times

Governor Schwarzenegger Vetoes AB 1868 That Would Have Banned Discretionary Clauses in Group Insurance Policies

Today Governor Schwarzenegger vetoed AB 1868 that would have banned discretionary clauses in group insurance policies. This is a disappointment to consumer groups but not to insurers who rely on them. Currently, the Department of Insurance bans them in group policies anyway. Here are the Governor’s comments on why it was vetoed:

To the Members of the California State Assembly:

I am returning Assembly Bill 1868 without my signature.

This bill would prohibit the Insurance Commissioner from approving any disability or

life insurance policy if it includes a provision that would reserve discretionary authority

to the insurer to determine eligibility for benefits, and voids certain provisions of a policy

or agreement if it provides or funds life insurance or disability insurance coverage.

This bill is unnecessary, as the Insurance Commissioner already has the authority to

prohibit the use of discretionary clauses.

For this reason I cannot sign this bill.

Sincerely,

Arnold Schwarzenegger

Certain Health Insurance Reforms Go Into Effect as of September 23

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 the NAIC website. 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.

Disability Policy Discretionary Clauses Come Under Congressional Attack

Policyholder/Employee groups who have group disability insurance coverage through their employers and who find themselves operating in the byzantine world of ERISA have long criticized discretionary clauses contained in such ERISA policies. These often have the effect of giving insurance companies firmer ground to support claim denials because the “abuse of discretion” standard of review typically applies. This higher standard of review makes it more difficult for policyholders/employees to challenge disability claim denials.

California Governor Arnold Schwarzenegger has the opportunity to sign California Assembly Bill 1868 (“AB 1868”) and to prohibit these discretionary clauses. In the recent case of Standard Insurance Company v. Morrison, the Ninth Circuit Court of Appeals ruled that the California Insurance Commissioner has the authority to disapprove any disability insurance policies that contain discretionary clauses.

Arthur Postal of National Underwriter writes about such clauses in an article entitled “Disability Policy Discretionary Clauses Come Under Fire.” Here is a reprint of it:

WASHINGTON BUREAU — The long-term disability insurance (LTD) industry took a licking today during a Senate Finance Committee hearing.

Senate Finance Committee Chairman Max Baucus, D-Mont., said LTD insurers have doctors with conflicts of interest review claims.

“Many of these doctors are employed either by the insurance company or by companies that do a lot of business with the insurance company,” Baucus said. “These arrangements make it far too easy for the doctors to deny claims, terminate claims, or reject appeals.”

Ronald Leebove, a rehabilitation counselor who appeared for the American Board of Forensic Counselors, Springfield, Mo., said private group LTD policies fail to provide the protection insurers promise.

“There are many tricks and tactics used by the insurance companies to deny claims,” Leebove said.

Several witnesses talked about employers’ and insurers’ use of Employee Retirement Income Security Act (ERISA) provisions to give plan administrators’ discretion over LTD benefits decisions, and to ward off challenges of benefits determinations.

Mark DeBofsky, a partner at Daley, DeBofsky & Bryant, Chicago, a law firm, said the courts have gone against legislative intent and transformed ERISA into “a shield that protects insurance companies from having to face the consequences of unprincipled benefit denials and other breaches of fiduciary duty.”

In most cases involving LTD claim disputes, there is not even a trial, DeBofsky said.

“Instead,” DeBofsky said, “courts conduct reviews of claim records assembled and shaped by self-serving insurance companies without hearing any testimony whatsoever, under a procedure that gives more deference to the insurance company than a court would give a Social Security administrative law judge in its review of a Social Security disability benefit claim denial.”

Judge William Acker Jr., a senior district court judge in northern Alabama, testified that the “courts have not rescued ERISA” in its handling of long-term disability cases. “If anything, they have dug the ERISA hole deeper,” Acker said. “ERISA jurisprudence will stay as messed up as it is unless Congress reworks it.”

Paul Graham, a senior vice president at the American Council of Life Insurers (ACLI), Washington, defended disability insurers.

Disability insurance can be susceptible to fraud and abuse, and many states have passed regulations that require short-term disability (STD) insurance and long-term disability disability insurance companies to report instances of suspected fraud, Graham said.

“While fulfilling their contractual and regulatory responsibilities, insurers need to remain attentive to potentially fraudulent claims,” Graham said.

Therefore, he said, an eligibility determination, whether made by the insurance carrier or other fiduciary, is only valid for the information at that point in time and must be periodically re-evaluated to account for changes in the claimant’s condition.

Graham said a 2008 industry study that included a majority of group disability carriers found that 79% of submitted claims were approved.

Of those claims not approved, over 25% were not paid because the claimant recovered too quickly to collect benefits, Graham testified.

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