Legislative Update -- Assembly Insurance Committee


The Assembly Insurance Committee met this past Wednesday to hear the following measures:

AB 211 (Cedillo): This bill would require vouchers for supplemental job displacement benefits under the workers' compensation system to be provided to injured workers no later than 80 days after the first medical report indicates 1) that there will be some degree of permanent partial disability and 2) the injured worker is permanent and stationary.

AB 211 passed the committee with a vote of 10-0.

AB 226 (Solorio): This bill would, whenever the Unemployment Fund indicates a negative balance, require the Employment Development Department the department shall include in the status report on the Unemployment Fund the estimated cost impact on employers from the changes in the Federal Unemployment Tax Act (FUTA) tax credit and the estimated amount that the state is expected to pay in interest charges on any outstanding loan to the federal government.

AB 226 passed the committee with a vote of 12-0.

AB 315 (Solorio): This urgency measure, sponsored by the California Department of Insurance, would conform California law to the Nonadmitted and Reinsurance Reform Act ("NRRA") that is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, enacted last year by the federal government.  That federal act included provisions to add uniformity and simplicity to the states' regulatory laws governing the placement of surplus line insurance, and collection of the surplus line tax.  It pre-empts certain regulatory requirements of California law, but more importantly, unless conforming law is enacted by July 21 of this year, California's authority to collect the surplus line tax would also be limited.

Initially, the bill included two provisions that would have required California to adopt a inter-state tax collection compact.  California Insurance Wholesalers Association, Insurance Brokers and Agents of the West, and National Association of Professional Surplus Line Offices expressed concern to the Department that adopting such a compact may result in less tax revenue for California and that any discussions relative to compacts should be taken up separately and at a later time.  The Department agreed to remove the two provisions and, as amended, the 3 aforementioned groups removed their opposition and supported the legislation.

AB 315 passed the committee with a vote of 12-0.

AB 375 (Skinner): This bill would provide that back or neck injuries, MRSA, and blood-borne infectious diseases are presumed to be job related if suffered or contracted by a hospital employee.

AB 375 passed the committee with a vote of 8-4.

AB 378 (Solorio): This bill would regulate the dispensing of compounded medications in the workers' compensation system.  This bill would, for pharmacy services, drugs, or other pharmacy products not covered by a Medi-Cal payment system, instead make the maximum fee 83% of the average wholesale price of the lowest priced product of equivalent therapeutic effect.  This bill would, until the date that the administrative director adopts an official medical fee schedule for compounded drug products set the maximum reasonable fee for compounded drug products and the ingredients as prescribed.  This bill would not allow a fee for a compounded drug ingredient.  In addition, this bill would, until the date the administrative director adopts an official medical fee schedule specifically applicable to physician-dispensed products, require that the fee for any product dispensed by a physician not exceed the lesser of 120% of the physician's documented paid cost or the physician's documented paid cost plus $250.

AB 378 passed the committee with a vote of 9-0.

AB 584 (Fong): This bill would require that a physician who is conducting utilization review be licensed in California.

Opponents testified that utilization review was one of the most important provisions for employers in the 2004 workers' compensation reform.  They believe that this bill undermines their ability to effectively conduct utilization review, by causing delays and increasing costs.  They further argued that the medical treatment issues are not unique to California in law or practice, as the ACOEM Guidelines have been used in many states for far longer than they have been used in California.

AB 584 passed the committee with a vote of 8-4.

AB 689 (Blumenfield): This bill, sponsored by the California Department of Insurance, would require that insurance producers and insurers selling annuities have reasonable grounds to believe that their recommendations are suitable for consumers, and adopts a regulatory process to enforce this requirement.  This bill builds on, and in some sections exceeds, the requirements set forth in the 2010 National Association of Insurance Commissioners' (NAIC) Annuity Suitability Model Regulation, which was created as a result of national-level discussions regarding annuity suitability requirements.

Life insurers and producers had an oppose unless amended position on the bill because AB 689 differed from the NAIC's Suitability in Annuity Transactions Model in several sections.  The foremost concern is that the bill does not follow the NAIC model in recognizing the regulation of the federal Financial Industry Regulatory Authority (FINRA) over products sold by brokers and dealers.  The opposition states that the FINRA rules mirror the provisions in the NAIC model, and avoids duplicative and possibly conflicting interpretations of two sets of rules.  The opposition proposed the adoption of the NAIC Model's FINRA provision, which the author finally agreed to in meetings leading up to Wednesday’s hearing.  With that amendment, the opponents removed their opposition and supported the bill.

AB 689 passed the committee with a vote of 12-0.

AB 793 (Eng): This bill would prohibit an insurance broker or agent from participating in, being associated with, or employing any party that participates in the origination of a reverse mortgage, unless that agent or broker maintains procedural safeguards designed to ensure that the agent or broker transacting insurance has no direct financial incentive to refer the policyholder to a reverse mortgage lender.  AB 793 would generally prohibit individuals transacting insurance from receiving compensation, commission, or direct incentive for providing reverse mortgage borrowers with an insurance product that is connected to or a result of the reverse mortgage.  In addition, the bill would create an exception to the general prohibition on compensation if the agent or broker offers title insurance, hazard, flood, or other peril insurance, or similar products that are customary and normal under a reverse mortgage loan.

AB 793 passed the committee with a vote of 12-0.

AB 1106 (Achadjian): This bill would allow local public entities such as cities, counties, and special districts to apply for a refund of civil penalties assessed for violations of occupational safety and health laws if the conditions have been corrected.

AB 1106 passed the committee with a vote of 12-0.

AB 1129 (Portantino): This bill would allow the Director of the Employment Development Department to share information with a designated student loan guaranty agency with an operating agreement with the California Student Aid Commission.

AB 1129 passed the committee with a vote of 12-0.

AB 1155 (Alejo): This bill would prohibit discrimination on the basis of race, religious creed, color, national origin, age, gender, marital status, sex or genetic characteristics in the process of apportioning medical causation for purposes of determining an employer's liability for the permanent disability of an employee injured on the job.

AB 1155 would provide that a workers' compensation claim shall not be denied because the workers' injury or death was related to one of the protected classes noted above.

Lastly, the bill would define "genetic characteristics" by citation to the life and health insurance anti-genetic discrimination law that has been in effect and used by insurers for a number of years.

Opponents testified that they do not disagree that discrimination based on risk factors associated with the bill's protected categories is wrong.  They respond, however, by arguing that the law already provides protections, and the bill only serves to open a Pandora's Box of problems.  Specifically, opponents argue that the Vaira case proves that the law is not in need of change.  The court essentially determined that it is improper to use risk factors, and sent the case back to the WCAB to make sure that medical facts supported the apportionment.

AB 1155 passed the committee with a vote of 8-4.

AB 1168 (Pan): This bill would require that the Administrative Director adopt, on or before January 1, 2013, after public hearings, a fee schedule to establish the maximum reasonable fees to be paid to vocational experts in the workers' compensation system for vocational evaluations and expert testimony determined to be admissible by the Workers' Compensation Appeals Board (WCAB).  This bill would also prohibit a workers' compensation judge and the WCAB from allowing vocational expert fees in excess of the amount authorized by the schedule adopted pursuant to the bill's requirements.

AB 1168 passed the committee with a vote of 12-0.

AB 1263 (Williams): This bill would restrict State Compensation Insurance Fund officers and directors post-separation lobbying and contracting activities.

AB 1263 passed the committee with a vote of 12-0.