PA 08-178—sHB 5159

Insurance and Real Estate Committee

Judiciary Committee

AN ACT MODERNIZING INSURANCE DEPARTMENT FINES AND MAKING MINOR TECHNICAL REVISIONS TO THE INSURANCE STATUTES

SUMMARY: This act generally increases fines the insurance commissioner may assess against insurance companies, related companies, and people for violating Connecticut's insurance laws, including those related to utilization review, unauthorized insurers, producer and company licensing, unfair and prohibited practices, and fraud. It leaves unchanged most fines enacted since 1996, including those related to privacy, preferred provider networks, and self-insured workers' compensation laws.

The act requires insurers to pay claims from Department of Public Health-licensed emergency medical service personnel and organizations in accordance with the law's prompt claim payment requirements. An insurer's failure to pay claims as specified by law is an unfair and deceptive insurance act, for which the commissioner may assess fines as shown in the table below (see 39).

It also makes technical changes.

EFFECTIVE DATE: October 1, 2008

INSURANCE FINES INCREASED

Act

Description

Prior Fine

New Fine

1

General penalty – Violation of any Title 38a provision when no other penalty is provided

Up to $7,500

Up to $15,000

2

Company license suspension, revocation, or non-renewal for cause shown (Fine is in addition to, or in lieu of, license action. )

Up to $10,000

Up to $50,000

3

Assessments on domestic insurers – Failure to pay when due

$10 plus 6% annual interest

$25 plus 6% annual interest

4

Annual and quarterly financial reports of insurers and HMOs – Filing late

$100 per day for each day overdue

$175 per day for each day overdue

5

Managing General Agents Act – Violating the act (Fine is in addition to license revocation or suspension. )

$10,000 for each violation

$15,000 for each violation

6

Insurance Holding Company Act – An individual's willful violation of the act (If intentional fraud, the fine is in addition to, or in lieu of, up to two years in prison. )

Up to $3,000

Up to $15,000

6

Insurance Holding Company Act – An insurance company's willful violation of the act

Up to $10,000

Up to $50,000

6

Insurance Holding Company Act – Willfully and knowingly making a false statement or report to deceive the commissioner

Up to $25,000, up to five years in prison, or both

Up to $50,000, up to five years in prison, or both

6

Insurance Holding Company Act – An insurance company, without just cause, does not file a required registration statement

$100 each day, up to $10,000 maximum

$150 each day, up to $15,000 maximum

6

Insurance Holding Company Act – A director or officer willfully violates the act or agrees to engage in transactions or investments not properly reported or permitted

Up to $5,000 for each violation

Up to $7,500 for each violation

7

Insurance Premium Finance Companies – Violating act (Fine is in addition to, or in lieu of, license suspension or revocation. )

Up to $1,000 for each violation

Up to $5,000 for each violation

8

Utilization Review (UR) – Violating the UR law (Fine is in addition to license suspension or revocation. )

If company knew or should have known of violation.

Up to $1,000 for each violation and $10,000 maximum

Up to $5,000 for each violation and $50,000 maximum in any six-month period

Up to $1,500 for each violation and $15,000 maximum

Up to $7,500 for each violation and $75,000 maximum in any six-month period

8

Utilization Review – Violating commissioner's cease and desist order (Fine is in lieu of license suspension or revocation. )

Up to $50,000

Up to $75,000

9

Utilization Review – Providing fraudulent or misleading information to a UR company

Up to $5,000 or equal to the value of services provided due to the fraud

Up to $7,500 or equal to the value of services provided due to the fraud

10

Unauthorized Insurers Act– Not paying premium tax on time

The greater of 10% of the tax or $50, plus 1% interest per month

The greater of 10% of the tax or $75, plus 1% interest per month

11

Unauthorized Insurers Act—Any unauthorized insurer doing insurance business

Up to $10,000

Up to $50,000

11

Unauthorized Insurers Act—Violating the specific provisions of the act

$500 for first offense and $500 for each month it continues

$2,500 for first offense and $2,500 for each month it continues

12

Defrauding a life or accident insurance company

If less than $100 obtained due to fraud: up to $500, up to one year in prison, or both

(If more: up to 10 years in prison)

If less than $2,000 obtained due to fraud: up to $10,000, up to one year in prison, or both

(If more: up to 10 years in prison)

13

Standard Form of Fire Insurance Policy – Making, issuing, or delivering a fire insurance policy that is not the statutorily required standard policy

Up to $200 for each offense

Up to $1,000 for each offense

14

Group Life Insurance – Failure to give an insured a notice of insurance cancellation or discontinuance

Up to $1,000 for each violation

Up to $2,000 for each violation

15

Burial Contracts – Issuing burial contracts without a license or without the required provisions

Up to $500, up to one year in prison, or both

Up to $6,000, up to one year in prison, or both

16

Individual Health Insurance – Delivering an individual policy that does not meet statutory requirements

Up to $500 for each offense

Up to $10,000 for each offense

17

Group Health Insurance – Failure to give an insured a notice of insurance cancellation or discontinuance

Up to $1,000 for each violation

Up to $2,000 for each violation

18

Group Health Insurance – Delivering a group policy that does not meet statutory requirements

Up to $500 for each offense

Up to $1,000 for each offense

19

Consumer Dental Plans – Not complying with statutory requirements

Up to $1,000 for each violation

Up to $1,500 for each violation

20

Fraternal Benefit Societies– Making false or misleading statements regarding the insurance contract or knowingly receiving compensation because of such violation

$100 to $500 fine, 30 days to one year in prison, or both

$2,000 to $10,000 fine, 30 days to one year in prison, or both

21

Fraternal Benefit Societies– Willfully making a false or fraudulent statement on a membership application

$100 to $500 fine, 30 days to one year in prison, or both

$2,000 to $10,000 fine, 30 days to one year in prison, or both

21

Fraternal Benefit Societies– Soliciting membership for unlicensed fraternal benefit society

$50 to $200

$1,000 to $4,000

21

Fraternal Benefit Societies– Willfully violating, neglecting, or refusing to comply with fraternal benefit society statutes when no other penalty is specified

Up to $200

Up to $4,000

22

Credit Life, Accident and Health Insurance – Violating statutory requirements

Up to $250, two years in prison, or both

Up to $1,500, two years in prison, or both

23

Personal and Commercial Risk Insurance Rating Practices – Not complying with the commissioner's final order

Up to $1,000, but if willful, up to $10,000, up to one year in prison, or both

Up to $2,000, but if willful, up to $20,000, up to one year in prison, or both

24

Insurance Producers – Soliciting business for unlicensed insurance company

Up to $100, up to six months in prison, or both

Up to $2,000, up to six months in prison, or both

25

Insurance Producers – Acting without a license

Up to $500, up to three months in prison, or both

Up to $10,000, up to three months in prison, or both

26

Insurance Producers – Signing or countersigning insurance policies in blank by an insurance producer (Fine is in addition to license revocation. )

Up to $100

Up to $1,000

27

Public Adjusters – Acting as a public adjuster without a license

Up to $500, up to three months in prison, or both

Up to $10,000, up to three months in prison, or both

28

Certified Insurance Consultants – Not acknowledging or giving receipt for services

$50 to $500

$250 to $2,500

29

Certified Insurance Consultants – Receiving compensation in violation of law

$50 to $500 fine, 30 to 90 days in prison, or both

$250 to $2,500 fine, 30 to 90 days in prison, or both

30

Certified Insurance Consultants – Acting as certified insurance consultant without a license

$50 to $500 fine, up to six months in prison, or both

$250 to $2,500 fine, up to six months in prison, or both

31

Fraternal Agents –Acting as fraternal agent without a license

Up to $100

Up to $10,000

32

Licensing in General – Willful misrepresentation on a license application

Up to $500, up to six months in prison, or both

Up to $4,000, up to six months in prison, or both

33

Licensing in General – Impersonating another person when taking an insurance license examination

Up to $500, up to six months in prison, or both

Up to $4,000, up to six months in prison, or both

34

Licensing in General – For cause shown (Fine is in addition to or in lieu of license suspension or revocation. )

Up to $1,000

Up to $5,000

35

Surplus Lines Broker – Not making and filing an affidavit or willfully making a false affidavit

Up to $500, up to six months in prison, or both

Up to $4,000, up to six months in prison, or both

36

Certified Insurance Consultants – Not giving commissioner information within 10 days

$50 to $500

$250 to $2,500

37

Motor Vehicle Physical Damage Appraisers – Acting without a license

Up to $500, up to one year in prison, or both

Up to $2,500, up to one year in prison, or both

38

Casualty Claim Adjusters– Acting without a license

Up to $200, up to one year in prison, or both

Up to $2,000, up to one year in prison, or both

39

Unfair and Prohibited Practices – Committing an unfair or prohibited practice (Fine is in addition to, or in lieu of, license suspension or revocation and restitution. )

Up to $1,000 for each violation, $10,000 maximum

Up to $5,000 for each violation, $50,000 maximum

39

Unfair and Prohibited Practices – Knowingly committing an unfair or prohibited practice (Fine is in addition to, or in lieu of, license suspension or license revocation and restitution. )

Up to $5,000 for each violation, $50,000 maximum in any six-month period

Up to $25,000 for each violation, $250,000 maximum in any six-month period

39

Unfair and Prohibited Practices – Violating a cease and desist order (Fine is in addition to, or in lieu of, license suspension or revocation. )

Up to $10,000 for each violation

Up to $50,000 for each violation

40

Unfair and Prohibited Practices – Any misrepresentation to convince an insured to surrender a policy and replace it with another

Up to $500, up to 30 days in prison, or both

Up to $5,000, up to 30 days in prison, or both

41

Unfair and Prohibited Practices – Publishing a false statement of assets or one that does not meet statutory requirements

$500 for first offense, $1,000 for each subsequent offense

$10,000 for first offense, $20,000 for each subsequent offense

42

Connecticut Insurance Guaranty Association – Not paying assessment when due (Fine is in lieu of license suspension or revocation. )

Up to 5% of the unpaid amount per month, but at least $100 a month

Up to 5% of the unpaid amount per month, but at least $500 a month

43

Connecticut Life & Health Insurance Guaranty Association – Failure to pay when due (Fine is in lieu of license suspension or revocation. )

Up to 5% of the unpaid amount per month, but at least $100 a month

Up to 5% of the unpaid amount per month, but at least $500 a month

44

Brokered Transactions Guaranty Fund – Penalty for filing a document that is false or untrue or has a material misrepresentation

At least $200

At least $300

45

Brokered Transactions Guaranty Fund – Penalty for embezzlement (Penalty is in addition to restitution, attorney costs and fees, and other relief a court may order)

Up to $1,000

Up to $1,500

46

Rehabilitation and Liquidation Act – Failure to cooperate with the commissioner

Up to $10,000, up to one year in prison, or both; or up to $10,000 and suspended or revoked license

Up to $10,000, up to one year in prison, or both; or up to $25,000 and suspended or revoked license

47

Rehabilitation and Liquidation Act – Any agent not giving required notice of policies written for an insurer subject to liquidation or not filing a compliance report (Fine is in addition to, or in lieu of, license suspension or revocation. )

Up to $1,000

Up to $2,500

48

Rehabilitation and Liquidation Act – Not paying collected premiums and unearned commissions to the liquidator (Fine is in addition to, or in lieu of, license suspension, revocation, or non-renewal. )

Up to $1,000 for each violation

Up to $2,500 for each violation

49

Connecticut Insurance Information and Privacy Protection Act – Obtaining information from an insurance institution under false pretenses

Up to $10,000

Up to $20,000

51

Medical Discount Plans – Knowingly operating as a medical discount plan organization in violation of law

Up to $10,000

Up to $15,000

51

Medical Discount Plans – Knowingly aiding or abetting someone who the person knew or reasonably should have known was operating as a medical discount plan organization in violation of law

Up to $10,000

Up to $15,000

52

Medical Discount Plans – Violating any provision of the law regulating such plans

Up to $2,000

Up to $3,000

BACKGROUND

Prompt Claim Payment

Connecticut law requires insurers to pay claims within 45 days after receiving a (1) claimant's proof of loss (i. e. , claim form) or (2) health care provider's request for payment. When the insurer determines a deficiency in the claim or request prevents it from processing the claim, it must (1) send the claimant or provider written notice of all alleged deficiencies within 30 days of receiving the claim and (2) pay the claim within 30 days after receiving the requested information.

An insurer that fails to pay a claim in a timely manner must include 15% interest with the claim payment. The interest payment is in addition to other penalties that may apply by law. For any interest payments under $1, the insurer must instead deposit the interest in a separate, interest-bearing account and donate the account balance to the University of Connecticut Health Center at year end.

The law already includes as a “health care provider,” for purposes of prompt claims payment, physicians and surgeons, chiropractors, naturopaths, podiatrists, athletic trainers, physical therapists, occupational therapists, alcohol and drug counselors, radiologists, midwives, nurses, nurse's aides, dentists, dental hygienists, optometrists, opticians, respiratory care practitioners, perfusionists, pharmacists, psychologists, marital and family therapists, clinical social workers, professional counselors, massage therapists, dietician-nutritionists, and acupuncturists.

It also includes licensed health care institutions such as hospitals; residential care homes; health care facilities for the handicapped; nursing homes; rest homes; home health care agencies; homemaker-home health aide agencies; mental health facilities; substance abuse treatment facilities; student infirmaries; facilities providing services for the prevention, diagnosis, and treatment of human health conditions; and Medicaid-certified residential facilities for the mentally retarded.

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