Author: Perez J
BILL NUMBER: AB 1761 INTRODUCED
INTRODUCED BY Assembly Member John A. Perez
FEBRUARY 17, 2012
An act to add Section 100510 to the Government Code, to add Section 1360.5 to
the Health and Safety Code, and to amend Section 790.03 of the Insurance Code,
relating to health care coverage.
LEGISLATIVE COUNSEL'S DIGEST
AB 1761, as introduced, John A. Perez. California Health Benefit Exchange.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for
the licensure and regulation of health care service plans by the Department of
Managed Health Care and makes a willful violation of the act a crime. Existing
law also provides for the regulation of health insurers by the Department of
Insurance. Existing law requires the California Health Benefit Exchange
(Exchange) to facilitate the purchase of qualified health plans by qualified
individuals and qualified small employers by January 1, 2014. Existing law
prohibits certain unfair insurance practices specifically and unfair business
practices in general.
This bill would prohibit an individual or entity from holding himself, herself,
or itself out as representing, constituting, or otherwise providing services on
behalf of the Exchange unless that individual or entity has a valid agreement
with the Exchange to engage in those activities. The bill would specify that it
is an unfair business practice for health care service plans, entities engaged
in the solicitation of health care service plan contracts, and persons engaged
in the business of insurance to violate this provision. Because a willful
violation of the provisions governing health care service plans is a crime, the
bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and
school districts for certain costs mandated by the state. Statutory provisions
establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 100510 is added to the Government Code, to read:
100510. (a) No individual or entity shall hold himself, herself, or itself out
as representing, constituting, or otherwise providing services on behalf of the
Exchange unless that individual or entity has a valid agreement with the
Exchange to engage in those activities.
(b) Any individual or entity who aids or abets another individual or entity in
violation of this section shall also be in violation of this section.
SEC. 2. Section 1360.5 is added to the Health and Safety Code, to read:
1360.5. (a) For purposes of this section, "Exchange" means the California
Health Benefit Exchange established pursuant to Section 100500 of the
(b) It is an unfair business practice for a solicitor or solicitor firm to hold
himself, herself, or itself out as representing, constituting, or otherwise
providing services on behalf of the Exchange unless the solicitor or solicitor
firm has a valid agreement with the Exchange to engage in those activities.
(c) It is an unfair business practice for a health care service plan to hold
itself out as representing, constituting, or otherwise providing services on
behalf of the Exchange unless the plan has a valid agreement with the Exchange
to engage in those activities.
SEC. 3. Section 790.03 of the Insurance Code is amended to read:
790.03. The following are hereby defined as unfair methods of competition and
unfair and deceptive acts or practices in the business of insurance.
(a) Making, issuing, circulating, or causing to be made, issued or circulated,
any estimate, illustration, circular, or statement misrepresenting the terms of
any policy issued or to be issued or the benefits or advantages promised
thereby or the dividends or share of the surplus to be received thereon, or
making any false or misleading statement as to the dividends or share of
surplus previously paid on similar policies, or making any misleading
representation or any misrepresentation as to the financial condition of any
insurer, or as to the legal reserve system upon which any life insurer
operates, or using any name or title of any policy or class of policies
misrepresenting the true nature thereof, or making any misrepresentation to any
policyholder insured in any company for the purpose of inducing or tending to
induce the policyholder to lapse, forfeit, or surrender his or her insurance.
(b) Making or disseminating or causing to be made or disseminated before the
public in this state, in any newspaper or other publication, or any advertising
device, or by public outcry or proclamation, or in any other manner or means
whatsoever, any statement containing any assertion, representation, or
statement with respect to the business of insurance or with respect to any
person in the conduct of his or her insurance business, which is untrue,
deceptive, or misleading, and which is known, or which by the exercise of
reasonable care should be known, to be untrue, deceptive, or misleading.
(c) Entering into any agreement to commit, or by any concerted action
committing, any act of boycott, coercion, or intimidation resulting in or
tending to result in unreasonable restraint of, or monopoly in, the business of
(d) Filing with any supervisory or other public official, or making,
publishing, disseminating, circulating, or delivering to any person, or placing
before the public, or causing directly or indirectly, to be made, published,
disseminated, circulated, delivered to any person, or placed before the public
any false statement of financial condition of an insurer with intent to
(e) Making any false entry in any book, report, or statement of any insurer
with intent to deceive any agent or examiner lawfully appointed to examine into
its condition or into any of its affairs, or any public official to whom the
insurer is required by law to report, or who has authority by law to examine
into its condition or into any of its affairs, or, with like intent, willfully
omitting to make a true entry of any material fact pertaining to the business
of the insurer in any book, report, or statement of the insurer.
(f) (1) Making or permitting any unfair discrimination between individuals of
the same class and equal expectation of life in the rates charged for any
contract of life insurance or of life annuity or in the dividends or other
benefits payable thereon, or in any other of the terms and conditions of the
(2) This subdivision shall be interpreted, for any contract of ordinary life
insurance or individual life annuity applied for and issued on or after January
1, 1981, to require differentials based upon the sex of the individual insured
or annuitant in the rates or dividends or benefits, or any combination thereof.
This requirement is satisfied if those differentials are substantially
supported by valid pertinent data segregated by sex, including, but not limited
to, mortality data segregated by sex.
(3) However, for any contract of ordinary life insurance or individual life
annuity applied for and issued on or after January 1, 1981, but before the
compliance date, in lieu of those differentials based on data segregated by
sex, rates, or dividends or benefits, or any combination thereof, for ordinary
life insurance or individual life annuity on a female life may be calculated as
follows: (A) according to an age not less than three years nor more than six
years younger than the actual age of the female insured or female annuitant, in
the case of a contract of ordinary life insurance with a face value greater
than five thousand dollars ($5,000) or a contract of individual life annuity;
and (B) according to an age not more than six years younger than the actual age
of the female insured, in the case of a contract of ordinary life insurance
with a face value of five thousand dollars ($5,000) or less. "Compliance date"
as used in this paragraph shall mean the date or dates established as the
operative date or dates by future amendments to this code directing and
authorizing life insurers to use a mortality table containing mortality data
segregated by sex for the calculation of adjusted premiums and present values
for nonforfeiture benefits and valuation reserves as specified in Sections
10163.1 and 10489.2 or successor sections.
(4) Notwithstanding the provisions of this subdivision, sex-based differentials
in rates or dividends or benefits, or any combination thereof, shall not be
required for (A) any contract of life insurance or life annuity issued pursuant
to arrangements which may be considered terms, conditions, or privileges of
employment as these terms are used in Title VII of the Civil Rights Act of 1964
(Public Law 88-352), as amended, and (B) tax sheltered annuities for employees
of public schools or of tax exempt organizations described in Section 501(c)(3)
of the Internal Revenue Code.
(g) Making or disseminating, or causing to be made or disseminated, before the
public in this state, in any newspaper or other publication, or any other
advertising device, or by public outcry or proclamation, or in any other manner
or means whatever, whether directly or by implication, any statement that a
named insurer, or named insurers, are members of the California Insurance
Guarantee Association, or insured against insolvency as defined in Section
119.5. This subdivision shall not be interpreted to prohibit any activity of
the California Insurance Guarantee Association or the commissioner authorized,
directly or by implication, by Article 14.2 (commencing with Section 1063).
(h) Knowingly committing or performing with such frequency as to indicate a
general business practice any of the following unfair claims settlement
(1) Misrepresenting to claimants pertinent facts or insurance policy provisions
relating to any coverages at issue.
(2) Failing to acknowledge and act reasonably promptly upon communications with
respect to claims arising under insurance policies.
(3) Failing to adopt and implement reasonable standards for the prompt
investigation and processing of claims arising under insurance policies.
(4) Failing to affirm or deny coverage of claims within a reasonable time after
proof of loss requirements have been completed and submitted by the insured.
(5) Not attempting in good faith to effectuate prompt, fair, and equitable
settlements of claims in which liability has become reasonably clear.
(6) Compelling insureds to institute litigation to recover amounts due under an
insurance policy by offering substantially less than the amounts ultimately
recovered in actions brought by the insureds, when the insureds have made
claims for amounts reasonably similar to the amounts ultimately recovered.
(7) Attempting to settle a claim by an insured for less than the amount to
which a reasonable person would have believed he or she was entitled by
reference to written or printed advertising material accompanying or made part
of an application.
(8) Attempting to settle claims on the basis of an application which was
altered without notice to, or knowledge or consent of, the insured, his or her
representative, agent, or broker.
(9) Failing, after payment of a claim, to inform insureds or beneficiaries,
upon request by them, of the coverage under which payment has been made.
(10) Making known to insureds or claimants a practice of the insurer of
appealing from arbitration awards in favor of insureds or claimants for the
purpose of compelling them to accept settlements or compromises less than the
amount awarded in arbitration.
(11) Delaying the investigation or payment of claims by requiring an insured,
claimant, or the physician of either, to submit a preliminary claim report, and
then requiring the subsequent submission of formal proof of loss forms, both of
which submissions contain substantially the same information.
(12) Failing to settle claims promptly, where liability has become apparent,
under one portion of the insurance policy coverage in order to influence
settlements under other portions of the insurance policy coverage.
(13) Failing to provide promptly a reasonable explanation of the basis relied
on in the insurance policy, in relation to the facts or applicable law, for the
denial of a claim or for the offer of a compromise settlement.
(14) Directly advising a claimant not to obtain the services of an attorney.
(15) Misleading a claimant as to the applicable statute of limitations.
(16) Delaying the payment or provision of hospital, medical, or surgical
benefits for services provided with respect to acquired immune deficiency
syndrome or AIDS-related complex for more than 60 days after the insurer has
received a claim for those benefits, where the delay in claim payment is for
the purpose of investigating whether the condition preexisted the coverage.
However, this 60-day period shall not include any time during which the insurer
is awaiting a response for relevant medical information from a health care
(i) Canceling or refusing to renew a policy in violation of Section 676.10.
SEC. 5. No reimbursement is required by this act pursuant to Section 6 of
Article XIII B of the California Constitution because the only costs that may
be incurred by a local agency or school district will be incurred because this
act creates a new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of Section
17556 of the Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California Constitution.