BILL NUMBER: AB 1572	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MARCH 29, 2007

INTRODUCED BY   Assembly Member DeVore
   (Coauthors: Assembly Members Benoit and Silva)

                        FEBRUARY 23, 2007

   An act to amend Section  1363.01   1399.72
 of the Health and Safety Code, relating to health care 
coverage   service plans  .


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1572, as amended, DeVore. Health care  coverage:
disclosures.   service plans: conversion.  
   Existing law, the Knox-Keene Health Care Service Plan Act of 1975,
provides for the licensure and regulation of health care service
plans by the Department of Managed Health Care. The act requires that
a plan intending to convert from nonprofit to for-profit status,
submit a conversion proposal to the director and, before approving
the conversion, the director is required to find that the proposal
sets aside the fair market value of the nonprofit plan and dedicates
and transfers it to a tax-exempt charitable organization with a
charitable mission and grantmaking function of serving the health
care needs of the people of California.  
   This bill would instead require, that at least 90% of the money
expended annually to fulfill the charitable mission and grantmaking
function of the tax-exempt charitable organization receiving the
set-aside be spent on health care services for Californians, as
specified, who are not receiving health care services through a
government program.  
   Existing law provides for the regulation of health care service
plans by the Department of Managed Health Care. Existing law requires
a plan that covers prescription drug benefits to provide specified
information to enrollees, including information regarding whether the
plan uses a formulary. Under existing law, a plan that covers
prescription drug benefits must also provide, upon request,
information to members of the public regarding whether a specific
drug is on the plan's formulary.  
   This bill would make a technical, nonsubstantive change to those
provisions.
   Vote: majority. Appropriation: no. Fiscal committee:  no
  yes  . State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 1399.72 of the  
Health and Safety Code   is amended to read: 
   1399.72.  (a)  Any   A  health care
service plan that intends to convert from nonprofit to for-profit
status, as defined in subdivision (b), shall, prior to the
conversion,  submit a conversion proposal to the director and
 secure approval from the director.
   (b)  For the purposes of this section, a "conversion" or "convert"
by a nonprofit health care service plan means the transformation of
the plan from nonprofit to for-profit status, as determined by the
director.
   (c)  Prior to approving a conversion, the director shall find that
the conversion proposal meets all of the following charitable trust
requirements:
   (1)  The fair market value of the nonprofit plan is set aside for
appropriate charitable purposes. In determining fair market value,
the director shall consider, but not be bound by, any market-based
information available concerning the plan.
   (2)  The set-aside shall be dedicated and transferred to one or
more existing or new tax-exempt charitable organizations operating
pursuant to Section 501(c)(3) (26  U.S.C.A.  
U.S.C.  Sec. 501(c)(3)) of the  federal 
Internal Revenue Code. The director shall consider requiring that a
portion of the set-aside include equity ownership in the plan.
Further, the director may authorize the use of  a federal
Internal Revenue Code Section 501(c)(4) organization (26 U.S.C.A.
Sec. 501(c)(4))   an organization operating pursuant to
Section 501(c)(4) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)
(4))  if, in the director's view, it is necessary to ensure
effective management and monetization of equity ownership in the plan
and if the plan agrees that the Section 501(c)(4) organization will
be limited exclusively to these functions, that funds generated by
the monetization shall be transferred to the Section 501(c)(3)
organization except to the extent necessary to fund the level of
activity of the Section 501(c)(4) organization as may be necessary to
preserve the organization's tax status, that no funds or other
resources controlled by the Section 501(c)(4) organization shall be
expended for campaign contributions, lobbying, or other political
activities, and that the Section 501(c)(4) organization shall comply
with reporting requirements that are applicable to Section 501(c)(3)
organizations, and that the  Section  501(c)(4) organization
shall be subject to any other requirements imposed upon  Section
 501(c)(3) organizations that the director determines to be
appropriate.
   (3)  Each  Section  501(c)(3) or 501(c)(4) organization
receiving a set-aside, its directors and officers, and its assets
including any plan stock, shall be independent of any influence or
control by the health care service plan and its directors, officers,
subsidiaries, or affiliates.
   (4)   The   At least 90 percent of the money
expended annually to fulfill the  charitable mission and
 grant-making   grantmaking  functions of
the charitable organization receiving any set-aside shall be 
dedicated to serving the health care needs of the people of
California   spent on health care services for citizens
who reside in California and who are not receiving health care
services through a local, state, or federal program  .
   (5)  Every  Section  501(c)(3) or 501(c)(4) organization
that receives a set-aside under this section shall have in place
procedures and policies to prohibit conflicts of interest, including
those associated with  grant-making  
grantmaking  activities that may benefit the plan, including the
directors, officers, subsidiaries, or affiliates of the plan.
   (6)  Every  Section  501(c)(3) or 501(c)(4) organization
that receives a set-aside under this section shall demonstrate that
its directors and officers have sufficient experience and judgment to
administer  grant-making  grantmaking  and
other charitable activities to serve the state's health care needs.
   (7)  Every  Section  501(c)(3) or 501(c)(4) organization
that receives a set-aside under this section shall provide the
director and the Attorney General with an annual report that includes
a detailed description of its  grant-making  
grantmaking  and other charitable activities related to its use
of the set-aside received from the health care service plan. The
annual report shall be made available by the director and the
Attorney General for public inspection, notwithstanding the
California Public Records Act (Chapter 3.5 (commencing with Section
6250) of Division 7 of Title 1 of the Government Code). Each
organization shall submit the annual report for its immediately
preceding fiscal year within 120 days after the close of that fiscal
year. When requested by the director or the Attorney General, the
organization shall promptly supplement the report to include any
additional information that the director or the Attorney General
deems necessary to ascertain compliance with this article.
   (8)  The plan has satisfied the requirements of this chapter, and
a disciplinary action pursuant to Section 1386 is not warranted
against the plan.
   (d)  The plan shall not file any forms or documents required by
the Secretary of State in connection with any conversion or
restructuring until the plan has received an order of the director
approving the conversion or restructuring, or unless authorized to do
so by the director. 
  SECTION 1.    Section 1363.01 of the Health and
Safety Code is amended to read:
   1363.01.  (a)  Every plan that covers prescription drug benefits
shall provide notice in the evidence of coverage and disclosure form
to enrollees regarding whether the plan uses a formulary. The notice
shall be in language that is easily understood and in a format that
is easy to understand. The notice shall include an explanation of
what a formulary is, how the plan determines which prescription drugs
are included or excluded, and how often the plan reviews the
contents of the formulary.
   (b)  Every plan that covers prescription drug benefits shall
provide to members of the public, upon request, information regarding
whether a specific drug or drugs are on the plan's formulary. Notice
of the opportunity to secure this information from the plan,
including the plan's telephone number for making a request of this
nature, shall be included in the evidence of coverage and disclosure
form to enrollees.
   (c)  Every plan shall notify enrollees, and members of the public
who request formulary information, that the presence of a drug on the
plan's formulary does not guarantee that an enrollee will be
prescribed that drug by his or her prescribing provider for a
particular medical condition.