News Archives - Page 25 of 37 - McKennon Law Group

California Supreme Court Prohibits the Collection of ZIP Codes

The collection of ZIP codes by retailers may now be prohibited following the recent California Supreme Court decision in Pineda vs. William Sonoma, __ Cal. 4th__ (February 10, 2011). Writing for a unanimous court, Justice Morena found that ZIP codes are “personal identification information” for the purposes of the Song-Beverly Credit Card Act (“Credit Card Act “). Under the Credit Card Act, personal identification information may not be recorded nor required of a customer in order to make an in-store purchase using a credit card.

Initially passed in 1990, the Credit Card Act was enacted “to address the misuse of personal identification information for, inter alia, marketing purposes.” It prohibits retailers from asking customers for their personal identification information and recording it during credit card transactions. Specifically, section 1747.08(a) provides that no firm shall “[r]equest, or require as a condition to accepting the credit card as payment in full or in part for goods or services, the cardholder to provide personal identification information, which the . . . firm . . . accepting the credit card writes, causes to be written, or otherwise records upon the credit card transaction form or otherwise.” Since its initial passage, there have been multiple class action lawsuits against retailers violating this statute. As recently as 2008, California 4th District Court of Appeals addressed this specific issue in Party City Corp. v. Superior Court, 169 Cal.App.4th 497 (2008) where it held that ZIP codes were too general to be covered by the Credit Card Act because they pertain to a group of individuals, not a specific individual.

Not to be deterred, Jessica Pineda brought a class action against Williams-Sonoma for violations of the Credit Card Act “and Business and Professions Code section 17200 et seq. Her lawsuit was based on a 2008 visit to a Williams-Sonoma Store in California. While making her purchase, the cashier asked for her zip code, but did not tell her what the information would be used for. Thinking the information was necessary to complete the transaction, Pineda provided the information. Later, using specialized computer software, Williams-Sonoma conducted a “reverse lookup” and was able to determine Pineda’s previously unknown mailing address by matching her name and zip code in a third-party database. This information was then stored in Williams-Sonoma’s own database for use in direct-mail marketing campaigns. Aware of the court’s prior holding in Party City, Pineda pursued her class action on the grounds that an essential element was missing from the prior cases. Namely, allegations that Williams=Sonoma actually use of the acquired ZIP code. Rather than rule that harm was a required element, the court instead overruled Party City altogether.

In Pineda, the Supreme Court construed the definition of “personal identification information” broadly to include any information concerning the cardholder. Personal identification information is defined in subsection (b) of the Credit Card Act as “information concerning the cardholder . . . including, but not limited to, the cardholder’s address and telephone number.” The Court reasoned that since a cardholder’s ZIP code refers to the area where a cardholder lives or works, it would qualify as information that pertains to the card holder. In addition, since a ZIP code is part of the address, the statute “should be construed as encompassing not only a complete address, but also its components.” Further, in reversing Party City, the Court rejected the argument that a ZIP code should not be protected because it does not pertain to a specific individual. An address or phone number, both of which are explicitly defined as personal identification information by section 1747.08, might also pertain to individuals other than the cardholder. Therefore, the fact that a ZIP code could pertain to multiple individuals did not render it exempt from the Credit Card Act.

The Court found further support in “the legislative history of the Credit Card Act in general, and section 1747.08 in particular, [which] demonstrates the Legislature intended to provide robust consumer protections by prohibiting retailers from soliciting and recording information about the cardholder that is unnecessary to the credit card transaction.” Here, the ZIP codes at issue were not collected for identification purposes nor were they necessary in order to complete the credit card transaction. Instead, Williams-Sonoma collected the ZIP codes specifically for marketing purposes. The difference is key. Had Williams-Sonoma collected ZIP codes for identification purposes, it would have been governed by Civil Code section 1747.08(d). This statute allows a business to require reasonable forms of identification from cardholder, such as a driver’s license, but it may not record any of the information on that license, including the cardholder’s ZIP code. It would be inconsistent with the intent of the Legislature to allow in subdivision (a) what would be explicitly forbidden in subdivision (d) – namely the requesting and recording of a ZIP code. The logical conclusion, the court held, is that the term “personal identification information” as used in section 1747.08, includes a cardholder’s ZIP code.

Within California, the effect of this ruling is significant. Retail stores routinely ask customers for their ZIP code for both marketing and regional sales forecasting. The potential effect is compounded by the fact that in 2008, this practice was considered exempt from the Credit Card Act by the court’s holding in Party City. Seemingly overnight, actions that were previously authorized could now subject retail stores to statutory penalties up to $250 for the first violation and $1,000 for each subsequent violation. At a minimum, California retailers should take a close look at their information collection practices and consider updating those policies in light of this decision.

Dental Hygienist Wins Large Jury Verdict in Disability Insurance Lawsuit

In 1996, Plaintiff Laura Kieffer developed carpal tunnel syndrome and severe cervical pain which forced her to stop working as a dental hygienist. Thereafter, Kieffer started receiving disability payments under an individual disability insurance policy she purchased from Paul Revere Life Insurance Company and its parent company the Unum Group Corporation. Even though she had been receiving disability payments for nearly ten years, Unum terminated her benefits in March of 2008. As a result, Laura sued in Los Angeles Superior Court alleging that Unum had unreasonably terminated her benefits. She sued for breach of contract, insurance bad faith and for punitive damages. This week, a jury awarded her $4.2 million in compensatory and punitive damages. Unum intends to appeal the verdict.

Nurses’ Association Study Shows That California Insurers Denied 26 Percent of All Health Insurance Claims in 2010

Despite more attention focused on the nation’s largest health insurance companies with their recent requests for large premium increases and with all of the talk about national healthcare reform, California’s largest health insurance companies continue to deny about 26 percent of all health insurance claims, according to a recently released study by the California Nurses Association(“CAN”)/National Nurses United (“NNU”).

Blue Shield, which has recently garnered attention for requesting premium rate increases of up to 59 percent for individuals in California, denied nearly two million claims last year, trailing only Anthem Blue Cross, which denied nearly six million claims. PacifiCare had the highest percentage of denials at a whopping 44 percent.

For the first three quarters of 2010, seven of California’s largest insurers rejected 13.1 million claims, 26 percent of all claims submitted, a number only slightly below the 26.8 percent rate for 2009. The data, new findings by the Institute of Health and Socio-Economic Policy, the CNA/NNU research arm, is based on data from the California Department of Managed Care.

Claims denial rates by leading California insurers, for the first three quarters of 2010, were:

PacifiCare – 43.9%
Cigna – 39.6%
Anthem Blue Cross – 27.3%
HealthNet – 24.1%
Blue Shield – 21.9%
Kaiser Permanente – 20.2%
Aetna – 5.9%

Since 2002, these seven companies, which account for more than three-fourths of all insurance enrollees in California, have rejected 67.5 million claims. Cigna, which denied 40 percent of claims, showed the biggest increase from 2009, increasing its rejection rate by 5.3 percent. Kaiser Permanente accounted for the biggest drop, a one year decline of 7.4 percent in denials. Blue Shield slightly increased its denial rate by .3 percent from 2009.

“These rejection rates demonstrate one reason medical bills are a prime source of personal bankruptcies as doctors and hospitals will push patients and their families to make up what the insurer denies,” said CNA/NNU Co-President DeAnn McEwen. The national reform law signed by President Obama last spring has, to date, had no impact on the high pace of insurance denials, she noted.

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

House and Money

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

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