BILL NUMBER: AB 2138	ENROLLED
	BILL TEXT

	PASSED THE SENATE  AUGUST 22, 2012
	PASSED THE ASSEMBLY  AUGUST 27, 2012
	AMENDED IN SENATE  JUNE 18, 2012

INTRODUCED BY   Assembly Member Blumenfield

                        FEBRUARY 23, 2012

   An act to amend Sections 1872.85 and 1872.87 of the Insurance
Code, relating to insurance.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2138, Blumenfield. Health insurance fraud: annual fee.
   Existing law provides for the regulation of disability insurers by
the Insurance Commissioner. Existing law requires a disability
insurer or other entity liable for any loss due to health insurance
fraud doing business in California to pay an annual fee that does not
exceed $0.10 per year for each insured in order to fund increased
investigation and prosecution of fraudulent disability insurance
claims. Existing law requires that 50% of those funds be distributed
to the Fraud Division of the Department of Insurance for enhanced
investigative efforts and that the other 50% be distributed to local
district attorneys for the investigation and prosecution of
disability insurance fraud cases, as specified.
   This bill would authorize the commissioner to increase the fee to
no more than $0.20 per year for each insured and would require that
30% of those funds go to the Fraud Division of the department and
that 70% go to the local district attorneys. The bill would require
the commissioner to adopt regulations to implement these provisions.
The bill would authorize an insurer to recoup this fee by way of a
surcharge on premiums or by including the fee within the insurer's
rates, as specified.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 1872.85 of the Insurance Code is amended to
read:
   1872.85.  (a) Every admitted disability insurer or other entity
liable for any loss due to health insurance fraud doing business in
this state shall pay an annual special purpose assessment to be
determined by the commissioner, but not to exceed twenty cents
($0.20) annually for each insured under an individual or group
insurance policy it issues in this state, in order to fund increased
investigation and prosecution of fraudulent disability insurance
claims. After incidental expenses, 30 percent of those funds received
from the assessment per insured shall be distributed to the Fraud
Division of the Department of Insurance for enhanced investigative
efforts, and 70 percent of the funds shall be distributed to local
district attorneys, pursuant to subdivisions (b) and (c), for
investigation and prosecution of disability insurance fraud cases.
The funds received under this section shall be deposited into the
Disability Insurance Fraud Account, which is hereby created in the
Insurance Fund, and shall be expended and distributed, when
appropriated by the Legislature, only for enhanced investigation and
prosecution of disability insurance fraud.
   In the course of its investigation, the Fraud Division shall
aggressively pursue all reported incidents of probable fraud and, in
addition, shall forward to the appropriate disciplinary body the
names of any individuals licensed under the Business and Professions
Code who are convicted of engaging in fraudulent activity along with
all relevant supporting evidence.
   (b) The commissioner shall distribute funds pursuant to
subdivision (a) to district attorneys who are able to show a likely
positive outcome that will enhance the prosecution of disability
insurance fraud in their jurisdiction based on specific criteria
promulgated by the commissioner. A district attorney desiring funds
pursuant to subdivision (a) shall submit to the commissioner an
application that includes, but is not limited to, all of the
following:
   (1) The proposed use of the moneys and the anticipated outcome.
   (2) A list of all prior cases or projects in the district attorney'
s jurisdiction that have been funded under the provisions of this
section, and a copy of the final accounting for each case or project.
If a case or project is ongoing, the most recent accounting shall be
provided.
   (3) A detailed budget for the moneys, including salaries and
general expenses, that specifically identifies the purchase or rental
cost of equipment or supplies.
   (c) (1) A district attorney who receives moneys pursuant to this
section shall submit a final detailed accounting at the conclusion of
each case or project funded. For a case or project that continues
for longer than six months, an interim accounting shall be submitted
every six months, or as otherwise directed by the commissioner.
   (2) A district attorney who receives moneys pursuant to this
section shall submit a final report to the commissioner, which may be
made public, as to the success of each case or project funded by
this section. The report shall provide information and statistics on
the number of active investigations, arrests, indictments, and
convictions associated with a case or project. The applications for
moneys, the distribution of moneys, and the annual report required by
Section 1872.9 shall be public documents.
   (3) Notwithstanding any other provision of this section,
information submitted to the commissioner pursuant to this section
concerning criminal investigations, whether active or inactive, shall
be confidential.
   (4) The commissioner may conduct a fiscal audit of the programs
administered under this subdivision. The fiscal audit shall be
conducted by an internal audit unit of the department. The cost of
fiscal audits shall be paid from the Disability Insurance Fraud Fund,
upon appropriation by the Legislature.
   (5) If the commissioner determines that a district attorney is
unable or unwilling to investigate or prosecute a relevant disability
insurance fraud case, the commissioner may discontinue distribution
of moneys allocated for that matter pursuant to this section, and may
redistribute moneys to other eligible district attorneys.
   (d) Activities of the Fraud Division with regard to investigating
and prosecuting fraudulent disability insurance claims pursuant to
this section shall be included in the report required by Section
1872.9.
   (e) This section shall not apply to policies issued by a
reciprocal or interinsurance exchange, as defined by Sections 1303
and 1350, or coverage provided by or through a motor club, as defined
by Section 12142, affiliated with a reciprocal or interinsurance
exchange, if the annual premium charged for the coverage or the
annual cost to the insurer for providing that coverage does not
exceed one dollar ($1) per insured.
   (f) The commissioner shall adopt regulations to implement this
section in accordance with the rulemaking provisions of the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code).
  SEC. 2.  Section 1872.87 of the Insurance Code is amended to read:
   1872.87.  (a) Each insurer required to pay special purpose
assessments pursuant to Sections 1872.8, 1872.81, 1872.85, 1874.8, or
subdivision (a) of Section 1872.86 may, over a reasonable length of
time, but in no event later than the calendar year in which the
assessment is paid, recoup the special purpose assessments by way of
a surcharge on premiums charged for the insurance policies to which
those sections apply or by including the assessments within the
insurer's rates. Amounts recouped shall not be considered premiums
for any purpose, including the computation of gross premium tax or
agents' commission.
   (b) The amount of the surcharge shall be separately stated on
either a billing or policy declaration sent to an insured.
   (c) The commissioner, in consultation with the Director of Motor
Vehicles, shall report to the Governor and to the chair and vice
chair of the Joint Legislative Budget Committee prior to October 1,
2008, on the feasibility and fiscal impact of transferring collection
of the assessments specified in Sections 1872.8, 1872.81, and 1874.8
to the Department of Motor Vehicles to be performed in conjunction
with the registration of motor vehicles.