Health insurance: unlawful postclaims underwriting: penalties.

Existing law provides for the regulation of health insurers by the Department of Insurance. Existing law prohibits a health insurer from engaging in the practice of postclaims underwriting, which is defined to mean the rescinding, canceling, or limiting of a health insurance policy or certificate due to the insurer's failure to complete medical underwriting and resolve all reasonable questions arising from written information submitted on or with an insurance application. Existing law provides that any person willfully violating various provisions governing disability insurance policies, including health insurance policies, or orders of the commissioner in that regard, shall forfeit to the state a sum not to exceed $118 for each violation. Existing law requires these sums to be paid to the Insurance Commissioner and transmitted to the State Treasury for deposit in the General Fund. This bill would provide that a health insurer that unlawfully engages in the postclaims underwriting of a health insurance policy shall be liable to the state for a civil penalty to be fixed by the commissioner in an amount not to exceed $5,000, except that if the insurer knew, or had reason to know, that the act of postclaims underwriting was unlawful, the civil penalty shall be fixed by the commissioner in an amount not to exceed $10,000 for each act or violation. The bill would require the first $118 of these penalties to be deposited in the General Fund and the balance to be deposited in the Major Risk Medical Insurance Fund, to be used, upon appropriation by the Legislature, for the Major Risk Medical Insurance Program. The bill would make other related changes.