Legislation Archives - Page 5 of 6

California Insurance Commissioner Says Anthem Blue Cross Violated California Law More Than 700 Times

Just when you thought the bad news for Anthem Blue Cross (“Anthem”) could not get any worse, it does. According to an article by Duke Helfand appearing in today’s Los Angeles Times, California Insurance Commissioner Steve Poizner reported that Anthem, California’s largest for-profit health insurer, violated California law more than 700 times over a three-year period by failing to pay medical claims on time and misrepresenting policy provisions to customers.

Anthem could face fines of up to $7 million stemming from the alleged violations from 2006 to 2009. Poizner said that Anthem repeatedly failed to respond to state regulators in a “reasonable time” as they investigated complaints over the last year.

“We believe there is evidence to suggest there are serious issues with how Anthem Blue Cross pays claims,” Poizner said at a Sacramento news conference. “Most disturbing to us is that they don’t even respond” to the Department of Insurance “in a timely way.”

Anthem’s parent company, WellPoint Inc., said that it had not seen the enforcement action but would cooperate fully with Poizner to resolve the matter “in the best interests” of its policyholders.

“We take the issues raised by Commissioner Poizner very seriously,” Anthem said in a statement. “As the largest insurer in California, our responsibility is to pay the many millions of claims on behalf of our members each year fairly, fully and promptly.”

As reported in this blog, WellPoint and Anthem have faced intense criticism from consumers, regulators, members of Congress and the Obama administration over rate hike proposals of as much as 39% for customers with individual policies in California. Lawmakers in Sacramento and Washington are holding hearings this week on the increases, which have been postponed until May 1 amid the outcry.

The rate hikes would affect many of the 800,000 individual policyholders in California.

According to Poizner, nearly 40% of the violations in the Anthem case, 277, stem from allegations that the company failed to pay patient claims within 30 days as required by state law, officials said.

Poizner’s office filed the enforcement action against Anthem on Monday with the Office of Administrative Hearings. An administrative law judge will hear the matter. Each violation carries a maximum penalty of $10,000.

STOLI and Life Settlement Transactions Soon to be Regulated in California

Life settlements, also known in the industry as “stranger-originated life insurance” (“STOLI”) transactions have existed for several years but most states have not regulated them, at least until recently. The life insurance industry has for years attempted to eliminate such transactions as they typically are not in the insurer’s best financial interest. However, in recent years the industry has increased their support for efforts to differentiate between legitimate life settlements and STOLI. Both sides agree to the following general definition: A life settlement is the legitimate liquidation of a life insurance policy by an owner who has outlived the insurable interest upon which the policy was originally purchased. On the other hand, a STOLI transaction is initiated by a third party who offers monetary inducements to entice someone to purchase a life insurance policy with no legitimate insurable interest. The intended recipient of the policy’s value is the third party actually paying the premiums.

Legislative activity in the various states has substantially increased over the years as states have passed laws designed to stop, or at least regulate, STOLI transactions. This occurred recently in California. In October 2009, the California legislature enacted, and the governor signed, Senate Bill 1543 that regulates life settlement and STOLI transactions. The new law is known as the Life Settlements Act (“Act”) and it becomes effective on July 1, 2010. It is noteworthy that this bill provides that, with certain exceptions, it does not apply to any life settlement contract entered into on or before July 1, 2010. This bill would provide that it would apply to any transaction involving any life insurance policy in effect, or entered into, on or after the operative date of the bill.

The Act defines STOLI transactions as “an act, practice, or arrangement to initiate the issuance of a life insurance policy in this state for the benefit of a third-party investor who, at the time of policy origination, has no insurable interest, under the laws of this state, in the life of the insured.” The new law proscribes STOLI transactions as fraudulent. However, certain life settlement transactions are legal under the Act. It also restricts most transactions within the first two years of a policy. Finally, the new law mandates specific disclosures to consumers, including alternatives to life settlements, and requires the licensing of professionals who transact life settlement contracts. The law – California’s first STOLI legislation – makes California one of 26 states to enact laws regulating STOLI.

The Act further provides that:

STOLI practices include, but are not limited to, cases in which life insurance is purchased with resources or guarantees from or through a person or entity, that, at the time of policy inception, could not lawfully initiate the policy himself, herself, or itself, and where, at the time of inception, there is an arrangement or agreement, to directly or indirectly transfer the ownership of the policy or the policy benefits to a third party. Trusts that are created to give the appearance of insurable interest and that are used to initiate policies for investors violate insurable interest laws and the prohibition against wagering on life.

The Act explains that STOLI arrangements do not include lawful life settlement contracts as permitted by the Act. The Act defines a “Life settlement contract” as:

(k) “Life settlement contract” means a written agreement solicited, negotiated, or entered into in this state between a provider and an owner, establishing the terms under which compensation or anything of value will be paid, which compensation or thing of value is less than the expected death benefit of the insurance policy or certificate, in return for the owner’s assignment, transfer, sale, devise, or bequest of the death benefit or any portion of an insurance policy or certificate of insurance for compensation, provided, however, that the minimum value for a life settlementcontract shall be greater than a cash surrender value or accelerated death benefit available at the time of an application for a life settlement contract. “Life settlement contract” also includes the transfer for compensation or value of ownership or beneficial interest in a trust or other entity that owns such policy if the trust or other entity was formed or availed of for the principal purpose of acquiring one or more life insurance contracts, which life insurance contract is owned by a person residing in this state.

As noted above, the Act precludes a life settlement transaction within the first two years of the policy. The Act states:

(m) No person at any time prior to, or at the time of, the application for, or issuance of, a policy, or during a two-year period commencing with the date of issuance of the policy, shall enter into a life settlement regardless of the date the compensation is to be provided and regardless of the date the assignment, transfer, sale, devise, bequest, or surrender of the policy is to occur.

There still may be time to enter into a life settlement transaction before this law goes into effect. Even as to those transactions that predate the effect date of the Act, it would be a good idea to read it carefully and follow the requirements of the Act.

President Obama Favors Repealing Antitrust Exemption

Last year the House passed legislation which would repeal the limited exemption the insurance industry received when Congress passed the McCarran-Ferguson Act of 1945. The law shields insurance companies from federal antitrust laws as long as they are subject to state regulations.

Among those opposed to a repeal of the exemption is Nebraska Senator Ben Nelson, a Democrat who provided the 60th vote that cleared the way for the Senate’s Dec. 24 passage of its health bill. Nelson, a former insurance company executive and state insurance regulator, says a repeal would hurt small insurers.

House Rules Committee Chairman Louise Slaughter told reporters that Senate Judiciary Committee Chairman Patrick Leahy is negotiating with Nelson on the exemption to try to get his support.

“There is no earthly reason for the insurance companies to be exempt from the antitrust laws,” she said.

President Obama has now voiced his support for the repeal of the exemption. We’ll see who wins this healthcare battle very soon.

California to Announce New Rules for HMO Members

On Wednesday, the California Department of Managed Health Care (“CDMH”) is scheduled to roll out new regulations that limit HMO members’ wait times for an appointment with a physician or specialist, the Los Angeles Times reports. The rules stem from a 2002 state law that called for HMOs to provide faster access to medical care. Since the initial passage of the law, DMHC has been in negotiations with health plans, hospitals, physician groups and others to work out details of the regulations.

Officials say California will be the first state to limit wait times for HMO members. About 21 million state residents are enrolled in HMO plans. The regulations by the California Department of Managed Health Care, in the works for much of the last decade, will require that patients have access to a health care professional at all times. The Regulations will require that patients be treated by HMO doctors within 10 business days of requesting an appointment, and by specialists within 15. Patients seeking urgent care that does not require prior authorization must be seen within 48 hours. In addition, telephone calls to doctors’ offices will have to be returned within 30 minutes, and physicians or other health professionals will have to be available 24 hours a day.

The regulations also include wait time requirements for HMOs that offer dental, mental health, vision care and other services. Consumers enrolled in non-HMO plans will not be directly affected by the new rules. HMOs will need to submit plans for meeting the requirements within nine months and will need to comply with the new rules within one year.

After January 2011, DMHC will have the authority to penalize non-compliant HMOs. Consumers also will be able to notify the department about delays in HMO care (See Helfand, Los Angeles Times, 1/19)

California’s 2009 Insurance Legislation: It Was an Important Year

2009 was an important year for insurance legislation in California. An excellent review of this legislation was posted on December 4, 2009 by the Barger & Wolen LLP legal blog (quoted verbatim from the blog) as follows: “LIFE, HEALTH AND DISABILITY INSURANCE”

1. AB 23: Cal-COBRA Premium Assistance

Establishes notice requirements that must be provided to eligible qualified beneficiaries regarding the availability of premium assistance under the American Recovery and Reinvestment Act of 2009 (ARRA).
Qualified beneficiaries eligible for federal assistance may elect coverage under Cal-COBRA, and those enrolled in Cal-COBRA as of February 17, 2009 may request the federal premium assistance.

2. AB 76: Life and Annuity Consumer Protection Fund

Extends the provision creating the Life and Annuity Consumer Protection Fund to January 1, 2015.
Requires the California Insurance Commissioner (“Commissioner”) to publish an annual report on its Web site detailing certain protections for consumers of insurance products.

3. AB 108: Individual Health Care Coverage

Prohibits, except as specified, rescission, canceling, limiting the provisions, or raising premiums of a contract or policy due to omission, misrepresentation, or inaccuracy in the application after 24 months following issuance of the same.

4. AB 119: Pricing of Health Care Coverage

Prohibits premium, price or charge differentials based on the gender of specified individuals, commencing January 1, 2011.

5. AB 381: Unemployment Compensation Disability Benefits

Permits a community college district to elect to become an employer, subject to specified requirements pertaining to disability compensation.

6. AB 389: Long-Term Care Insurance

For long-term care insurance policies issued before new premium rate schedules are approved and for which rate revisions are filed on or after January 1, 2010, changes the calculation for determining what benefits are deemed “reasonable” in relation to premiums.
Permits the Commissioner to approve a rate revision based on less than a certain loss ratio in order to protect the financial condition of the insurer.
Revises the required qualifications of actuaries used by the Commissioner to review rate applications relative to long-term care insurance.

7. AB 1541: Health Care Coverage (Late Enrollment)

An individual, or dependent, who has lost or will lose Healthy Families Program coverage, Access for Infants and Mothers Program coverage, or Medi-Cal program coverage can requests enrollment within 60 days (changed from 30 days) after termination of that coverage without being considered a “late enrollee.”

8. AB 1543: Medicare Supplement Coverage[1]

Adopts changes and provisions as required by the federal Medicare Improvements for Patients and Providers Act and Genetic Information Nondiscrimination Act.
Adopts other amendments relating to open enrollment and guaranteed-issue.

LIFE SETTLEMENTS

SB 98 defines when certain trusts and special interest entities do not have an insurance interest in a life insurance policy. It also establishes a number of new provisions to regulate viatical and life settlements. It adds two new license classifications for “Life Settlement Provider” and “Life Settlement Broker.”

PROPERTY AND CASUALTY INSURANCE 1. AB 63: Service Contract, Retailers

Requires retailers of service contracts to maintain certain information about a contract that is in effect and provide such information or a copy of the contract to the contract purchaser or beneficiary upon request.
Does not apply to vehicle service contracts.

2. AB 601: Motor Vehicle Insurance, Special Assessments

Extends until January 1, 2015, the special assessment imposed on insurers, which is charged per motor vehicle insured.

3. AB 1179: Motor Vehicle Insurance, Damage Assessments

Requires that additional information regarding right to independent estimate be included in the Auto Body Repair Consumer Bill of Rights.

4. AB 1200: Motor Vehicle Insurance, Direct Repair Programs

Provides that insurers may (notwithstanding prohibition against requiring use of specific auto repair shop) provide truthful and nondeceptive information regarding the services and benefits available to the claimant.

5. SB 291: Mortgage Guaranty Insurance Reserves

Amends definition of “face amount of an insured mortgage” for purposes of determining surplus requirements.
Requires notice to Commissioner before insurer falls below surplus threshold and creates ability to seek waiver of requirement.

MISCELLANEOUS 1. AB 299: Insurance Omnibus Among other things, the bill:

Requires the California Department of Insurance to remove from, or clarify on, its Web site any pleading, order or document relating to an enforcement action that has been withdrawn.
Requires the Commissioner to consider additional criteria when examining the business and affairs of the insurer.
Allows the Commissioner to disclose market analysis data to any state or country insurance department, law enforcement officials, federal agency or NAIC.
All analyses pursuant to authorized examinations are at the expense of the insurer.
Requires insurer annual audits to be conducted in conformity with “standards adopted by the [NAIC],” and allows the Commissioner to grant multiple 30-day extensions to the audit due date.
Permits domestic insurers to invest in credit unions.
Prohibits excess fund investments in a loan or any other obligation to any one borrower or obligor as specified.
Requires insurers to provide to the Commissioner advance notice of the intent to enter into a tax sharing agreement.
Requires auto liability policy to provide for replacement of a child seat, as defined, that was damaged in a covered accident.

2. AB 328: Electronic Transactions

Deletes the exclusion of certain insurance statutes from applicability of Civil Code provisions permitting parties to conduct transactions by electronic means.
With respect to certain automobile insurance transactions, prohibits electronic delivery of certain documents unless the transaction commenced electronically.
Permits required notices related to certain types of insurance to be made electronically with consent of the parties, and imposes certain system and records requirements on the insurer related to the same.
Permits an insurer to pay claims with electronic fund transfer, with the consent of the insured.

3. AB 409: California Insurance Guarantee Association

Provides that the initial premium charge shall be adjusted by applying the same rate of premium charge as initially used to each insurer’s written premium as shown on the annual statement for the 2nd year following the year on which the initial premium charge “was based” (change from “is made”).

4. AB 470: Insurance Information Confidentiality

Authorizes the disclosure of information from an accident report, supplemental report, or investigative report to an insured’s lawyer if the insured is otherwise entitled to obtain the report.

5. AB 800: Insurance Producer Omnibus Makes a number of changes with respect to producer licensing, including that it:

Deletes pre-licensing education requirement for resident applicants with current nonresident licenses.
For persons licensed in 2010 or after, eliminates certain exemptions from education requirement.
Permits licensed California nonresident business entity producers to use licensed California resident individual producers to transact insurance.”

[1] AB 1543 was enacted as an urgency statute. As such, it became effective when it was chaptered on July 2, 2009.

Will Healthcare Reform Affect the Rate of Claim Denials?

On Monday October 19, 2009, Lisa Girion of the Los Angeles Times reported on the healthcare reform bills being debated in Congress and their potential impact on claim denials by insurers. Girion states that, “Despite growing frustration with the way health insurers deny medical treatments, major healthcare bills pending in Congress would give patients little new power to challenge those sometimes life-and-death decisions.” She further explains that “a patient’s ability to fight insurers’ coverage decisions could be more important than ever because Congress, in promoting cost containment and price competition, may actually add to the pressure on insurers to deny requests for treatment.”

The article discusses the wrongful death lawsuit filed by Hilda and Grigor Sarkisyan, whose daughter Nataline died in 2007 after Cigna decided not to cover a liver transplant. The lawsuit against Cigna over the transplant denial was dismissed this year by a federal judge, who ruled that the Employee Retirement Income Security Act (“ERISA”) preempts suits with state law claims for damages over such health benefit decisions. The Sarkisyans traveled to Washington this year to try to persuade members of Congress to pass legislation which would remove ERISA’s bar of certain types of damages that are now available under state law.

Rep. Adam B. Schiff (D-Burbank), who met with the Sarkisyans in Washington, said that there are not enough votes in Congress to pass such legislation. Insurers and employers strongly support ERISA’s limitations on damages. They say any increase in litigation would drive up costs and could force some employers to drop health benefits.

The healthcare reform bill pending in the House would extend the right to sue under state law for damages to anyone who buys coverage through one of the health insurance exchanges it envisions. That could include small businesses. However, the pending legislation does not remove ERISA’s barrier to such suits by employees who procure coverage in the employment-based insurance market.

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