ASSEMBLYMEMBER TED LIEU
53RD ASSEMBLY DISTRICT
For Immediate Release: January 15, 2008
Contact: David Ford
Phone: (916) 319-2053

Lieu Bill To Ban Kickbacks To Underwriters For Cancelling Health Policies Passes Assembly Health Committee

Sacramento, CA – The Assembly Health Committee today approved Assembly Bill (AB) 1150, by Assemblymember Ted Lieu, which would prohibit health plans and disability insurers from paying underwriters based on the number of policies they cancel.

“While the Legislature and the Governor are trying to make coverage available to more people, underwriters are getting paid to dump sick people,” Lieu said. “That’s unacceptable.”

AB 1150 is based on a recent case involving a large health insurer, who paid bonuses based in part on how many individual policyholders were dropped and how much money was paid. Although state law forbids insurance companies from tying any compensation for claims reviewers to their claims decisions, the plan’s attorneys argued that the law did not apply to in their case because the individual compensated was an underwriter – not a claims reviewer. AB 1150 addresses this loophole and strengthens the current prohibition on awarding bonus compensation for rescinding health care.

The bill has received support from health care advocacy organizations, including Health Access and the California Medical Association.

Lieu added: “This is an important step in making sure that every Californian has access to health care.  It removes a perverse incentive that a few unscrupulous underwriters have to deny care to premium-paying customers.”

AB 1150 now moves to the Assembly Appropriations Committee.