CALIFORNIA: AUDIT FINDS MISMANAGEMENT AT INSURANCE DEPT
A new state audit has found that the California DepartmentThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
of Insurance "has delayed investigating thousands of complaints
and has 'significant deficiencies' in the way it manages funds."
State Insurance Commissioner Chuck Quackenbush (R) is at the
"center of the storm," SAN FRANCISCO CHRONICLE reports. "Armed"
with the audit, a joint meeting of the state Senate and House
insurance committees will "closely examine the inner workings" of
the department, an "unusual" move, according to the CHRONICLE.
Lawmakers are paying "close attention" to the department because
its "activities affect so many consumers and a powerful
NOT THE FIRST STORM: CHRONICLE reports that the insurance
industry, which is regulated by the department, "largely
financed" Quackenbush's 1994 campaign, providing 70% of his
funds. State Rep. Liz Figueroa (D), said, "We have a
commissioner who was elected to be responsive to the electorate.
I don't see that happening" (Gunnison, 3/19). Prior to the
audit, the insurance department and the commissioner were
involved in two other recent controversies. Some politicians and
health care experts wanted to transfer control over managed care
regulation from the Department of Corporations to the insurance
department, a plan that met with serious opposition (see AHL
9/25/96). In addition, the commissioner was forced last month to
rescind his disputed directive that would have allowed insurance
companies to sell long-term care policies with fewer benefits
than guaranteed under a 1992 state law (see AHLs 2/25, 12/10/96).
MOOD MUSIC: The insurance department review, performed by
State Auditor Kurt Sjoberg, found "serious problems in internal
financial accounting" as well as with the Investigations Bureau,
which examines "reports of misconduct by agents, brokers and
insurers." The audit found "[n]o investigators were assigned to
122 of the potentially worst cases after more than two years."
The audit concluded that if the department "fails to complete
higher-priority investigations, it risks losing the public's
confidence in its ability to protect consumers from unethical
insurance companies, agents and brokers." Sjoberg stated in his
report, "Because the department exhibits these financial and
management shortcomings, we are concerned that the department has
limited effectiveness in meeting the public's need for
protection" (CHRONICLE, 3/19).