BILL NUMBER: AB 2907 CHAPTERED
BILL TEXT
CHAPTER 925
FILED WITH SECRETARY OF STATE SEPTEMBER 26, 2002
APPROVED BY GOVERNOR SEPTEMBER 25, 2002
PASSED THE SENATE AUGUST 29, 2002
PASSED THE ASSEMBLY AUGUST 29, 2002
AMENDED IN SENATE AUGUST 29, 2002
AMENDED IN SENATE AUGUST 27, 2002
AMENDED IN SENATE AUGUST 7, 2002
AMENDED IN SENATE JUNE 28, 2002
AMENDED IN SENATE JUNE 20, 2002
AMENDED IN ASSEMBLY MAY 14, 2002
AMENDED IN ASSEMBLY APRIL 11, 2002
INTRODUCED BY Assembly Members Cohn and Thomson
(Coauthors: Assembly Members Corbett, Correa, Goldberg, Pavley,
Richman, and Steinberg)
FEBRUARY 25, 2002
An act to amend Section 1386 of, and to add Section 1375.7 to, the
Health and Safety Code, and to add Section 10133.65 to the Insurance
Code, relating to health care coverage.
LEGISLATIVE COUNSEL'S DIGEST
AB 2907, Cohn. Provider contracts.
The Knox-Keene Health Care Service Plan Act of 1975 provides for
the regulation and licensing of health care service plans by the
Department of Managed Health Care and makes the willful violation of
any of its provisions a crime. Existing law also provides for the
regulation of health insurers by the Department of Insurance. Under
existing law, a plan and a health insurer are prohibited from
including certain provisions in a contract with a licensed health
care practitioner regarding the practitioner's provision of care to
an enrollee or insured.
This bill would prohibit provisions in a contract between a health
care service plan or health insurer and a health care provider, as
defined, that would allow the plan or insurer to unilaterally change
a material term of the contract without meeting specified
requirements, that would require the provider to accept additional
patients, as specified, and that would pertain to other specified
aspects of the provider's practice. The bill would provide that a
contract violating any of these prohibitions would be void, unlawful,
and unenforceable. The bill would also require the Department of
Insurance to report annually to the Legislature and the Governor
complaints it receives concerning these requirements and would
require the Department of Managed Health Care to report annually to
the Legislature and the Governor information it receives from plans
concerning their dispute resolution mechanism.
By creating new prohibitions applicable to health care service
plans, the violation of which would be a crime, the bill would impose
a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1375.7 is added to the Health and Safety Code,
to read:
1375.7. (a) This section shall be known and may be cited as the
Health Care Providers' Bill of Rights.
(b) No contract issued, amended, or renewed on or after January 1,
2003, between a plan and a health care provider for the provision of
health care services to a plan enrollee or subscriber shall contain
any of the following terms:
(1) (A) Authority for the plan to change a material term of the
contract, unless the change has first been negotiated and agreed to
by the provider and the plan or the change is necessary to comply
with state or federal law or regulations or any accreditation
requirements of a private sector accreditation organization. If a
change is made by amending a manual, policy, or procedure document
referenced in the contract, the plan shall provide 45 business days'
notice to the provider and the provider has the right to negotiate
and agree to the change. If the plan and the provider cannot agree
to the change to a manual, policy, or procedure document, the
provider has the right to terminate the contract prior to the
implementation of the change. In any event, the plan shall provide
at least 45 business days' notice of its intent to change a material
term, unless a change in state or federal law or regulations or any
accreditation requirements of a private sector accreditation
organization require a shorter timeframe for compliance. However, if
the parties mutually agree, the 45 business day notice requirement
may be waived. Nothing in this subparagraph limits the ability of
the parties to mutually agree to the proposed change at any time
after the provider has received notice of the proposed change.
(B) If a contract between a provider and a plan provides benefits
to enrollees or subscribers through a preferred provider arrangement,
the contract may contain provisions permitting a material change to
the contract by the plan if the plan provides at least 45 business
days' notice to the provider of the change and the provider has the
right to terminate the contract prior to the implementation of the
change.
(2) A provision that requires a health care provider to accept
additional patients beyond the contracted number or in the absence of
a number if, in the reasonable professional judgment of the
provider, accepting additional patients would endanger patients'
access to, or continuity of, care.
(3) A requirement to comply with quality improvement or
utilization management programs or procedures of a plan, unless the
requirement is fully disclosed to the health care provider at least
15 business days prior to the provider executing the contract.
However, the plan may make a change to the quality improvement or
utilization management programs or procedures at any time if the
change is necessary to comply with state or federal law or
regulations or any accreditation requirements of a private sector
accreditation organization. A change to the quality improvement or
utilization management programs or procedures shall be made pursuant
to paragraph (1).
(4) A provision that waives or conflicts with any provision of
this chapter. A provision in the contract that allows the plan to
provide professional liability or other coverage or to assume cost of
defending the provider in an action relating to professional
liability or other action is not in conflict with, or in violation
of, this chapter.
(5) A requirement to permit access to patient information in
violation of federal or state laws concerning the confidentiality of
patient information.
(c) Any contract provision that violates subdivision (b) shall be
void, unlawful, and unenforceable.
(d) The department shall compile the information submitted by
plans pursuant to subdivision (h) of Section 1367 of the Health and
Safety Code into a report and submit the report to the Governor and
the Legislature by March 15 of each calendar year.
(e) Nothing in this section shall be construed or applied as
setting the rate of payment to be included in contracts between
plans and health care providers.
(f) For purposes of this section the following definitions apply:
(1) "Health care provider" means any professional person, medical
group, independent practice association, organization, health
facility, or other person or institution licensed or authorized by
the state to deliver or furnish health services.
(2) "Material" means a provision in a contract to which a
reasonable person would attach importance in determining the action
to be taken upon the provision.
SEC. 2. Section 1386 of the Health and Safety Code is amended to
read:
1386. (a) The director may, after appropriate notice and
opportunity for a hearing, by order suspend or revoke any license
issued under this chapter to a health care service plan or assess
administrative penalties if the director determines that the licensee
has committed any of the acts or omissions constituting grounds for
disciplinary action.
(b) The following acts or omissions constitute grounds for
disciplinary action by the director:
(1) The plan is operating at variance with the basic
organizational documents as filed pursuant to Section 1351 or 1352,
or with its published plan, or in any manner contrary to that
described in, and reasonably inferred from, the plan as contained in
its application for licensure and annual report, or any modification
thereof, unless amendments allowing the variation have been submitted
to, and approved by, the director.
(2) The plan has issued, or permits others to use, evidence of
coverage or uses a schedule of charges for health care services that
do not comply with those published in the latest evidence of coverage
found unobjectionable by the director.
(3) The plan does not provide basic health care services to its
enrollees and subscribers as set forth in the evidence of coverage.
This subdivision shall not apply to specialized health care service
plan contracts.
(4) The plan is no longer able to meet the standards set forth in
Article 5 (commencing with Section 1367).
(5) The continued operation of the plan will constitute a
substantial risk to its subscribers and enrollees.
(6) The plan has violated or attempted to violate, or conspired to
violate, directly or indirectly, or assisted in or abetted a
violation or conspiracy to violate any provision of this chapter, any
rule or regulation adopted by the director pursuant to this chapter,
or any order issued by the director pursuant to this chapter.
(7) The plan has engaged in any conduct that constitutes fraud or
dishonest dealing or unfair competition, as defined by Section 17200
of the Business and Professions Code.
(8) The plan has permitted, or aided or abetted any violation by
an employee or contractor who is a holder of any certificate,
license, permit, registration, or exemption issued pursuant to the
Business and Professions Code or this code that would constitute
grounds for discipline against the certificate, license, permit,
registration, or exemption.
(9) The plan has aided or abetted or permitted the commission of
any illegal act.
(10) The engagement of a person as an officer, director, employee,
associate, or provider of the plan contrary to the provisions of an
order issued by the director pursuant to subdivision (c) of this
section or subdivision (d) of Section 1388.
(11) The engagement of a person as a solicitor or supervisor of
solicitation contrary to the provisions of an order issued by the
director pursuant to Section 1388.
(12) The plan, its management company, or any other affiliate of
the plan, or any controlling person, officer, director, or other
person occupying a principal management or supervisory position in
the plan, management company, or affiliate, has been convicted of or
pleaded nolo contendere to a crime, or committed any act involving
dishonesty, fraud, or deceit, which crime or act is substantially
related to the qualifications, functions, or duties of a person
engaged in business in accordance with this chapter. The director
may revoke or deny a license hereunder irrespective of a subsequent
order under the provisions of Section 1203.4 of the Penal Code.
(13) The plan violates Section 510, 2056, or 2056.1 of the
Business and Professions Code or Section 1375.7 of the Health and
Safety Code.
(14) The plan has been subject to a final disciplinary action
taken by this state, another state, an agency of the federal
government, or another country for any act or omission that would
constitute a violation of this chapter.
(15) The plan violates the Confidentiality of Medical Information
Act (Part 2.6 (commencing with Section 56) of Division 1 of the Civil
Code).
(c) (1) The director may prohibit any person from serving as an
officer, director, employee, associate, or provider of any plan or
solicitor firm, or of any management company of any plan, or as a
solicitor, if either of the following applies:
(A) The prohibition is in the public interest and the person has
committed, caused, participated in, or had knowledge of a violation
of this chapter by a plan, management company, or solicitor firm.
(B) The person was an officer, director, employee, associate, or
provider of a plan or of a management company or solicitor firm of
any plan whose license has been suspended or revoked pursuant to this
section and the person had knowledge of, or participated in, any of
the prohibited acts for which the license was suspended or revoked.
(2) A proceeding for the issuance of an order under this
subdivision may be included with a proceeding against a plan under
this section or may constitute a separate proceeding, subject in
either case to subdivision (d).
(d) A proceeding under this section shall be subject to
appropriate notice to, and the opportunity for a hearing with regard
to, the person affected in accordance with subdivision (a) of Section
1397.
SEC. 3. Section 10133.65 is added to the Insurance Code, to read:
10133.65. (a) This section shall be known and may be cited as the
Health Care Providers' Bill of Rights.
(b) No contract issued, amended, or renewed on or after January 1,
2003, between a health insurer and a health care provider for the
provision of covered benefits at alternative rates of payment to an
insured shall contain any of the following terms:
(1) A provision that requires a health care provider to accept
additional patients beyond the contracted number or in the absence of
a number if, in the reasonable professional judgment of the
provider, accepting additional patients would endanger patients'
access to, or continuity of, care.
(2) A requirement to comply with quality improvement or
utilization management programs or procedures of a health insurer,
unless the requirement is fully disclosed to the health care provider
at least 15 business days prior to the provider executing the
contract. However, the health insurer may make a change to the
quality improvement or utilization management programs or procedures
at any time if the change is necessary to comply with state or
federal law or regulations or any accreditation requirements of a
private sector accreditation organization. A change to the quality
improvement or utilization management programs or procedures shall be
made pursuant to subdivision (c).
(3) A provision that waives or conflicts with any provision of
the Insurance Code.
(4) A requirement to permit access to patient information in
violation of federal or state laws concerning the confidentiality of
patient information.
(c) If a contract is with a health insurer that negotiates and
arranges for alternative rates of payment with the provider to
provide benefits to insureds, the contract may contain provisions
permitting a material change to the contract by the health insurer if
the health insurer provides at least 45 business days' notice to the
provider of the change, and the provider has the right to terminate
the contract prior to implementation of the change.
(d) Any contract provision that violates subdivision (b) or (c)
shall be void, unlawful, and unenforceable.
(e) The Department of Insurance shall annually compile all
provider complaints that it receives under this section, and shall
report to the Legislature and the Governor the number and nature of
those complaints by March 15 of each calendar year.
(f) Nothing in this section shall be construed or applied as
setting the rate of payment to be included in contracts between
health insurers and health care providers.
(g) For purposes of this section, the following definitions apply:
(1) "Health care provider" means any professional person, medical
group, independent practice association, organization, health
facility, or other person or institution licensed or authorized by
the state to deliver or furnish health care services.
(2) "Health insurer" means any admitted insurer writing health
insurance, as defined in Section 106, that enters into a contract
with a provider to provide covered benefits at alternative rates of
payment.
(3) "Material" means a provision in a contract to which a
reasonable person would attach importance in determining the action
to be taken upon the provision.
SEC. 4. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.