Assembly Standing Committee on Insurance

Consent file item number two, AB 1933 Calderon and file item six, AB 2337 Dixon we're going to begin as a Subcommitee until we have a quorum, and I'm going to hand the gavel over to my Vice Chair, Assemblyman Chen, right now. And welcome to our Insurance Commissioner, Ricardo Lara.

Good to see you.

All right. Good morning, Members of the Committee. This Bill would help to provide a much-needed pay increase for investigators at the California Department of Insurance. The pay and equity between CDI and other divisions has been identified as a major factor impacting retention of sworn officers at CDI. Due to the importance and complexity of insurance fraud cases, it is vital that we seek a comparable wage to support the staffing of these public safety positions with experienced investigators.

Here to speak more about the need for this Bill is the Bill's sponsor, Insurance Commissioner Ricardo Lara. He is joined by Deputy Commissioner George Mueller from CDI's Enforcement Branch.

Great. Thank you. Thank you, Madam Chair Members. It's good to be back in this part of the building. Missed it. I'm here today to discuss AB 2872 by our Chairwoman, Lisa Calderon, which I probably am sponsoring. The Bill really seeks to support the critical work of my department's fraud investigation investigators and protect public safety. Our fraud investigators are the state's leaders in preventing and stopping insurance fraud, and they are really the best at what they do.

These cases, as the Chairwoman was saying, are very complex to investigate and are also some of the costliest to both businesses and consumers. Two recent investigations of these type of investigations were in tandem, I should say, with the California Department of Industrial Relations, in which we found millions of dollars in unreported payroll. These companies were not paying their employees for their work.

One company forced employees to clock out for breaks and continue to work, did not pay the employees overtime pay for work in excess of 40 weekly hours, and falsified employee pay stubs. In both cases, we were able to return hundreds of thousands of dollars to employees who were wronged. We are the lead agency in investigating healthcare insurance fraud that puts people's lives at risk.

Our Department has uncovered some of the largest healthcare insurance fraud schemes in California's history, including where they uncovered the payment of over $50 million in bribes and kickbacks between hospital executives, lawyers, and doctors in connection with unnecessary spinal surgeries. Thousands of injured workers, some who come from immigrant and other vulnerable communities, were victims of this dangerous fraud. Our investigators fight for the victims of this fraud and stop it before more people become victims.

Yet we are losing investigators to other departments simply because we can't pay them what they're worth. They are in the same bargaining unit as the California Department of Justice sworn investigators, but they earn 20% less than their colleagues. AB 2872 would fix that problem. Giving fraud investigators a raise would have minimal or no impact to the state budget as my Department is specifically funded agency, we are funded by the fees we collect through our enforcement of insurance law. The reality is simple.

This change would literally save Californians money. Insurance fraud is a multibillion-dollar drain on California's economy that continues to rise, resulting in the increase of cost for all of us. California consumers and businesses pay the price for these crimes through higher insurance premiums and more expensive goods and services. Fraud inflation is real, and we are working to stop it. The Coalition Against Insurance Fraud estimates the national economic impact of insurance fraud is around $300 billion each year, almost $1,000 per every single American.

My Department currently employs under 200 sworn officers to detect, investigate, and respond to insurance fraud statewide. Our Fraud Division receives over 18,000 suspected fraud claim referrals each year, which represents over 600 million in suspected losses. But we have to close thousands of suspected fraudulent claims each year simply because we do not have staff to work on these cases. We do the best to investigate as many cases as we can to protect as many consumers and businesses as possible.

Just last year, we were able to submit 860 cases to our district attorney office partners across the state who we work with to prosecute these crimes. However, current pay inequities among the investigator classifications have made it very difficult for us to retain and recruit experienced fraud investigators. The department's current vacancy rate for this classification is nearly 32%.

Less investigators means less protection against fraud in the world's largest second insurance market, and nearly 75% of the time when an investigator leaves our Department, they are going to the Department of Justice because they pay more. This has been an ongoing problem at our Department for almost two decades. Multiple insurance commissioners have attempted to address this pay inequity, pursuing various administrative and other avenues, and I'm now sponsoring this legislation in hopes of solving this problem once and for all.

This proposed legislation would raise the compensation for our department's warned peace officers to match that of the compensation of sworn peace officers at the Department of Justice who are in the same bargaining unit. This will close the 20% pay gap between two departments and have the Department of Insurance recruit and retain more fraud investigators. Our Department does incredible work with the resources we have.

This legislation will allow us to greatly expand those efforts and ensure more cases have been worked on to increase public safety and further protect consumers and our businesses. Again, thank you for your time, and would appreciate your support on this important Bill. Thank you.

Good morning, all. My name is Deputy Commissioner George Mueller. I'm with the Enforcement Branch that oversees the Fraud Division, Investigation Division. I'm going to speak from my heart a little bit this morning. This has been very, very troubling. I've been with this Department now nine years, and you can see with our staff that's here today who is supporting this as well.

I've worked with local law enforcement, county law enforcement, and state law enforcement, and never have I seen this type of pay parity in my entire career. Our mission is to protect all Californians' underserved communities, and I can't think the Commissioner and Assemblywoman enough for what we're trying to do here today. We cannot do this work. We hire these people, we put them through a long background process. Six months, they have to go through the psych med phase.

Once they get through that, we then put them through a long field training officer program. That's another six months to a year as well. Our Department put so much into training these folks, we actually got the POST Peace Officer Standards Training Organizational Achievement Award. The only other state agency than CHP that has gotten that award in the last 20 years. That's how much we invest in our employees.

We put them through the academy, then they come out, we get them experienced, they write more search warrants and do more criminal filings with our DA partners. For example, the Commissioner talked about the money. Just alone the last three years, we got $230 million restitution for crime victims, the industry, across the board as well. This problem has to be solved because we continue to hire.

Our vacancy rate at one point was 24%, and now it's up to 32% because, as the Commissioner says,75% of our people are going to DOJ. I can't blame young people. That 21% is a lot in today's day. They have to make this right, and they have to fix that across the board for everybody.

So I'm just speaking from my heart this morning I had some notes, but I just want you to know that this is hurting our Department, and it's hurting consumers and Californians across the state. So thank you.

Thank you so much for your testimony. Do we have any additional witnesses in support that would like to comment? We just need your name, your position, and the organization that you're representing. Thank you very much.

Mister Chairman and Members. John Norwood. On behalf of the Independent Insurance Agents and Brokers of California, we support this legislation. Thank you.

Good morning. Shari McHugh on behalf of the Pacific Association of Domestic Insurance Companies in support of the Bill. Thank you.

Good morning. Allison Adey on behalf of the Personal Insurance Federation of California, very happily in support of the Bill.

Mark Sektnan, American Property Casualty Insurance Association, strongly in support of the Bill.

Mister Vice Chair, Madam Chair, Mister Commissioner. Shane Lavigne on behalf of the California Statewide Law Enforcement Association, the bargaining unit for the CDI investigators. We'd love to support the Bill. Seeking pay benefits supreme in great working conditions and pay and benefits for our members of our bargaining unit are our top priority. The thing that we can't support at the moment is a parity formula with DOJ.

But otherwise, we would be glad to support this Bill as it moves forward. Thank you.

Thank you very much. Now, do we have any key witnesses in opposition? Any witnesses in opposition in the audience? With that, Madam Chair, would you like to close?

Yes, thank you. And at the appropriate time, I'd like to ask for an aye vote when it's appropriate.

We don't have a quorum as of yet, but thank you so much for your enthusiasm. We'll go ahead and Madam Secretary, with that, we'll move on to the next bill.

No questions. Okay, thank you. All right, Vice Chair and Members, I'd like to present AB 1844, which allows the Senate pro tem and the speaker of the Assembly to sit on the Fair Plan Governing Committee. This would allow them two new appointees who will be non-voting Members similar to the four appointees that the Governor has. This Committee has held two oversight hearings on the fair plan. The most recent hearing brought to light the dire financial standing of the fair plan.

It's become very apparent how important the role of the fair plan is to the overall health of the insurance market and more importantly, to our constituents. The speaker and Senate pro tem should have a seat at the table and I don't have any witnesses.

Thank you. Thank you, Mr. Chair. And I want to thank you for bringing this forward, Madam Chair. I've been sitting for probably, I think, two and a half years on the Middle Mile Broadband Advisory Committee relating to the broadband infrastructure that we're attempting to build in California that we are building in California. And I just want to say that having a Member of the Legislature involved in that process makes a difference.

And when we were talking about the fair plan and the immense responsibilities that this plan has, I think it's more than appropriate that we have someone there and someone who will be there every meeting and someone who will engage, because this is a really critical component of our insurance system right now. So I thank you for bringing the Bill forward.

Thank you.

Thank you, Dr. Wood. Do we have any other questions from the Committee? Any folks in the audience for witnesses in support?

Good morning, Vice Chair and Members. Peter Ansel from California Farm Bureau. In support.

Good morning, Assemblymembers. My name is Claudia Mildner. I'm the Assistant Deputy Legislative Director at the California Department of Insurance. And we are in support of this Bill.

Witnesses in opposition? Seeing none. Madam Chair, would you like to close?

Yes. Thank you. And at the appropriate time, I respectfully ask for an aye vote.

Thank you, Madam Chair, I believe you have one last Bill.

One more Bill. Okay, Vice Chair and Members, I'm presenting AB 2260. First, I'd like to start off by saying that I'm going to accept the Committee amendments outlined in the analysis as author's amendments. I'd also like to thank the California Independent insurance agents and brokers for working with my staff on this very important addition to the Bill. As I mentioned in my previous statement, this Committee has held several hearings on the FAIR Plan.

I think we'd all prefer for the FAIR Plan to be the insurer of last resort. Unfortunately, this isn't the case at this point in time. AB 2260 will require the FAIR Plan to provide a report to the relevant policy committees with important information. This Bill will provide us with transparency which we need to further our oversight efforts. Thank you.

Thank you, Madam Chair. Do we have any witnesses in support? Any questions from Committee Members? Witness in support? Seeing none. Witnesses in opposition? Seeing none. Madam Chair, would you like to close? Oh, sorry, Dr. Wood.

I'm sorry. I thought I saw a couple of people who might want to speak in support.

Thank you. Witness support. Thank you, Dr. Wood.

Good morning, Vice Chair and Members. Peter Ansel, California Farm Bureau and support.

Good morning again, Vice Chair and Members. Claudia Milner, Department of Insurance, again in support. Thank you.

Thank you. Witness in opposition? Seeing none. Madam Chair, would you like to close?

Yes. Thank you. And at the appropriate time, I respectfully ask for an aye vote.

Member Ortega, would you like to present your Bill? Thank you.

Okay, the next item is AB-1870 by Assemblywoman Ortega. Whenever you're ready.

Thank you, Madam Chair and Members. Thank you for the opportunity to present AB-1870 today. This Bill simply informs injured workers of their right to consult an attorney during the workers' compensation process via including a notice on the employee's right poster. There is an extremely large disparity in success of workers comp cases between applicants who had access to a lawyer and those who did not.

In the last six years, an average of 145,000 injured workers who had a lawyer per year had asked to have their denial of benefits overturned. During the same period, an average of only 1800 unrepresented injured workers per year asked to have their denial or benefits overturned. In cases in which workers do not have an attorney, it is far less likely that they will receive either treatment or workers compensation benefits for their workplace injuries.

By simply adding a notice to the employees' rights poster advising employees that they have the right to consult an attorney through the workers' comp process. AB-1870 will ensure that workers have an equal, fair justice and benefits to the access to the benefits that they are owed. Testifying and support with me today is Jason Marcus with the California Applicants' Attorneys Association.

Good morning Madam Chair, Committee Members, and Assemblymember Ortega. Again, my name is Jason Marcus with the California Applicants' Attorneys Association. We are an association of attorneys who represent injured workers throughout the state. I am currently serving as our Legislative Chair. I served as President in 2018. In addition, I am an attorney in private practice here in Sacramento and I've been representing injured workers for more than the last 15 years. I want to thank the author.

I want to thank the Chair and the Committee Members and Committee Staff for their work on this Bill. As Assemblymember Ortega said, this is a simple and straightforward Bill, that would simply add a notice to the employees' rights posters that all employers are required to post, that a worker who suffers a workplace injury has a right to seek out and consult with an attorney, and to do so at no cost upfront to that worker.

As you heard Assemblymember Ortega say, the data clearly shows that workers without an attorney are at a severe disadvantage in the system when their benefits or their claims are denied or delayed. The worker has the opportunity to adjudicate that claim at what is called the Workers Compensation Appeals Board, which is our administrative court system that deals with workers compensation disputes. But workers, if they don't know how to do that, have no way to challenge their denial.

And as the data shows, in the last six years, on average, the claims that are heard at our court, 98% of those cases involve represented workers. Less than 2% of those cases involve workers without an attorney and I think the data shows that if folks don't have an attorney, they simply can't access the court system, they can't access justice.

I think the other thing that's important about this Bill is advising workers that when they consult with an attorney, there is no cost to that worker for the initial consultation. As someone who meets with injured workers on a regular basis, one of the first questions I get is, what do I owe you? What is this going to cost? What are you going to charge me? And the first thing I tell them in that conversation is, there's no charge for this time.

There's no charge for this meeting. You're not going to get a Bill from me or my office at any point. And that's the same for all of us attorneys that represent injured workers. We get paid on a contingency fee. If the worker gets benefits at the end of their case, that's where our fee comes from.

This Bill would add that information to the notice so that workers are informed of their rights, and when their claims are denied, they have the opportunity to seek out representation and hopefully get the benefits that they are owed. So thank you for the opportunity to testify, and we respectfully request an aye vote on AB-1870.

Thank you. And we're just going to take a pause here to establish a quorum. Please call a roll. [Roll Call]

A motion? Do we have any additional support in the room for this Bill?

Elmer Lazarde, on behalf of the California Labor Federation. In support.

Daniel Pearl. On behalf of the American Federation of State County Municipal Employees. In strong support.

Okay, thank you. Is there any opposition in the room? Okay, seeing none, please call the roll. Oh, I'm sorry. Would you like to close?

Thank you, Madam Chair. Respectfully ask for your aye vote.

Thank you.

File number eight, AB-1870. Motion is do-pass to appropriations. [Roll Call]

Thank you.

Thank you.

Okay. Secretary, call the roll.

[Roll Call]

Okay, we're still waiting for two authors, so we're gonna open the roll for. We need a motion.

[Unintelligble]

Thank you. Please call the roll.

[Roll Call]

Here. We're talking about what we're doing.

File item number four.

Yes. Aye.

[Roll Call]

Thank you. So we're still waiting for two authors. If I could ask the sergeant to please call Assembylman Hoover and Assemblywoman Papan. Thank you. While we're waiting, we're gonna allow Mr. Gipson to add on to some bills.

[Roll Call]

Good morning, Assemblyman Hoover. Whenever you're ready, sir, you can present AB 2227.

Thank you so much, Madam Chair and members. Appreciate the opportunity to present AB 2227. This bill will clarify the limits of venue for unemployment insurance fraud to be prosecuted in the county where the defendant was transacting business that resulted in the alleged offense, or where any money or property from the alleged offense was obtained since 2020 due to COVID-19 pandemic and a rise in Unemployment Insurance claims. California's Unemployment Insurance Program has suffered large amounts of fraud. Fraud estimated over $31 billion.

Defendants who may have obtained fraudulent funds are likely to have traveled out of state or be non-residents using stolen identities to obtain benefit cards. Unfortunately for the county that I represent, current law limits the place for violations of these violations to the County of Sacramento. If the defendant has no residence or place of business in California, AB 2227 simply seeks to amend this to allow these trials to take place in the counties where the violations actually occurred. Very simple bill would greatly appreciate an aye vote. And with me today to speak and support is McCoy on behalf of the Conference of California Bar Association.

Whenever you're ready, sir.

The California Conference Bar Association submitted a letter in support and I have nothing more to add beyond that and what the Assemblyman said. Thank you.

Good to know. Thank you. Do we have any witnesses in opposition? Do we have anyone for public comment? All right. Any questions for the author? No. Okay. And I think we have a motion and a second. Okay. Would you like to close, sir?

Just respectfully request an aye vote. Thank you.

Thank you. Please call the roll.

[Roll Call]

Thanks so much.

You're welcome. Assemblymember Papan, whenever you're ready. So next we're going to hear AB 2123. Papan.

Well, good morning, Madam Chair and Members. I'm delighted to be here with you today. This Bill represents a pared down version of a Bill I had last year that received bipartisan, unanimous support from this Committee. I'm hoping to get it again. So the Bill relates to paid family leave. And this is just a modest adjustment to paid family leave in that it says that an employer may not require you to take two weeks of your vacation time before you can put in for paid family leave.

And so my Bill would remove this provision saying that an employer would allow you to do this. Instead, an employer may not allow you to do this. As we all know, paid family leave allows workers to take time off to care for a sick family Member or bond with a new baby. Some employees pay. Since employees pay into this program, they should be able to access these benefits without any strings attached.

Removing barriers to accessing paid family leave also helps promote gender equality in the workforce by allowing both mothers and fathers to take time off for caregiving responsibilities. This helps reduce the burden of caregiving disproportionately placed on women and encourages greater sharing of caregiving responsibilities between partners. As I mentioned, I had a similar Bill last year. This Bill is pared down in honor of our budget situation, and so I'm looking forward to having support this year because it's a very reasonably, modestly tailored Bill. With me today, I'm honored to have Shazi Kamali from Legal aid at Work good morning.

My name is Shazzy Kamali. I'm a Staff Attorney for Legal Aid at Work. Legal Aid at Work is a nonprofit legal aid organization dedicated to empowering parents, caregivers, and people with serious health conditions to care for themselves and their families without sacrificing their jobs or income. We hear from over a thousand working families every year, and many of them reach out to us because they have trouble accessing paid family leave.

Paid family leave is 100% funded by workers own paycheck deductions, and employers don't contribute to the program at all. Nevertheless, some workers aren't able to access it like they should because of the provision that allows an employer to require their employees to use up to two weeks of accrued vacation before they can access PFL. So, as any parent or family caregiver will tell you, caregiving and parenting is not a vacation. Workers pay for these benefits.

They should be able to access them when they need them and when they become eligible. In fact, 2023 polling from the small business Majority shows that a majority of California small business owners support this change because it would clarify and simplify the process. And AB 2123 makes a small, no cost change to the PFL program and would have positive impacts for families. We respectfully ask for your aye vote.

Thank you. Do we have any witnesses in opposition? No, we have any public comment? Additional support

Hello, my name is Sarah Diaz with the California WIC Association. We're in strong support and also testifying on behalf of the following organizations in support the Food Empowerment Project, the LA alliance for a New Economy, the LA Best Babies Network, the National Partnership for Women and Families, the Orange County Equality Coalition, Parent Voices, California Public Council, Working Partnerships USA, WorkSafe, Childcare Law Center, Friends Committee on Legislation of California Small Business Majority, and the California Childcare Resource and referral network. Thank you. Thank you.

Good morning. My name is Jenya Cassidy and I'm with the California Work and Family Coalition. We're in strong support of AB 2123. Also testifying on behalf of the following organizations in strong support. Asian Law Alliance, Breastfeed, La California Breastfeeding Coalition, California Coalition on Family Caregiving, California Federation of Business and Professional Women caring across generations, Center for Community Action and Environmental Justice, Center for Workers Rights, Citizens for Choice, Electric Universe, equal rights advocates and Family Caregiver Alliance.

Danita Stromgren, volunteer with AARP California, representing 3.2 million Members in California in strong support.

Good morning. Chair and Members, Karen Stout, here on behalf of Reproductive Freedom for all California. We're in strong support.

Thank you. Okay, do we have any questions for the author? Assemblywoman Ortega?

I want to thank the author, and if she would allow me, I would love to come on as a co author.

I'd be honored.

Thank you. Right. Honor. Great. Would you like to close?

Respectfully request an aye vote. Thank you, Madam Chair.

Thank you. Please call the roll [Roll Call]

Thank you so much.

Thank you. Thank you. At this time, we're going to allow. Does anyone need to add on? No. Okay, we're going to leave the roll open for 10 minutes for Members to get here. Thank you.

[Roll Call]

Assembly Insurance Committee is adjourned.