BILL NUMBER: SB 1379	CHAPTERED
	BILL TEXT

	CHAPTER  607
	FILED WITH SECRETARY OF STATE  SEPTEMBER 30, 2008
	APPROVED BY GOVERNOR  SEPTEMBER 30, 2008
	PASSED THE SENATE  AUGUST 29, 2008
	PASSED THE ASSEMBLY  AUGUST 25, 2008
	AMENDED IN ASSEMBLY  AUGUST 22, 2008
	AMENDED IN ASSEMBLY  AUGUST 8, 2008

INTRODUCED BY   Senator Ducheny

                        FEBRUARY 21, 2008

   An act to amend Sections 1356, 1367.01, 1367.03, 1368, 1368.04,
1374.9, 1374.34, 1393.6, and 128555 of, and to add Section 1341.45
to, the Health and Safety Code, and to add Section 12739.05 to the
Insurance Code, relating to health care, making an appropriation
therefor, and declaring the urgency thereof, to take effect
immediately.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1379, Ducheny. Physician and surgeon loan repayment: health
care service plans: California Major Risk Medical Insurance Program.
   Existing law establishes the Steven M. Thompson Physician Corps
Loan Repayment Program, which provides for the repayment of
educational loans, as specified, obtained by a physician and surgeon
who practices in a medically underserved area of the state, as
defined. Existing law establishes the Medically Underserved Account
for Physicians within the Health Professions Education Fund for the
purpose of funding the loan repayment program and specifies that
funds placed in the account are continuously appropriated for those
purposes.
   Existing law, the Knox-Keene Health Care Service Plan Act of 1975
(the Knox-Keene Act), provides for the licensure and regulation of
health care service plans by the Department of Managed Health Care.
Existing law subjects health care service plans to various fines and
administrative penalties for failing to comply with specified
provisions of the act and requires that certain administrative
penalties be deposited in the Managed Care Fund. Existing law also
requires health care service plans to pay specified assessments each
fiscal year as a reimbursement of their share of the costs and
expenses reasonably incurred in the administration of the act.
Existing law requires the adjustment of those assessments and other
charges set forth in the act if the director of the department
determines that they are in excess of the amount necessary, or are
insufficient, to meet the expenses of the act. Under existing law,
the Managed Risk Medical Insurance Board manages the California Major
Risk Medical Insurance Program (MRMIP) to provide major risk medical
insurance coverage to eligible persons who have been rejected for
health care coverage by at least one private health plan. Existing
law creates the Major Risk Medical Insurance Fund, and continuously
appropriates the fund to the board for purposes of the program.
   This bill would prohibit using the fines and administrative
penalties authorized by the Knox-Keene Act to reduce those
assessments and would prohibit any refunds or reductions in those
assessments in specified circumstances. The bill would create the
Managed Care Administrative Fines and Penalties Fund and would
require those fines and administrative penalties to be deposited in
that fund. The bill would require, beginning September 1, 2009, and
annually thereafter, that the first $1,000,000 deposited in that fund
be transferred to the Medically Underserved Account for Physicians
to be used, upon appropriation by the Legislature, for the purposes
of the loan repayment program and that the remaining moneys deposited
in that fund be transferred to the Major Risk Medical Insurance Fund
to be used, upon appropriation by the Legislature, for purposes of
MRMIP. The bill would specify that those funds are not continuously
appropriated. The bill would also require the department to make
one-time transfers of $1,000,000 and $10,000,000 in fines and
administrative penalties from the Managed Care Fund to the Medically
Underserved Account for Physicians within the Health Professions
Education Fund and the Major Risk Medical Insurance Fund,
respectively, to be used for the purposes of those programs. By
depositing these funds into continuously appropriated funds, the bill
would thereby make an appropriation.
   This bill would declare that it is to take effect immediately as
an urgency statute.
   Appropriation: yes.


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

  SECTION 1.  Section 1341.45 is added to the Health and Safety Code,
to read:
   1341.45.  (a) There is hereby created in the State Treasury the
Managed Care Administrative Fines and Penalties Fund.
   (b) The fines and administrative penalties collected pursuant to
this chapter, on and after the operative date of this section, shall
be deposited into the Managed Care Administrative Fines and Penalties
Fund.
   (c) The fines and administrative penalties deposited into the
Managed Care Administrative Fines and Penalties Fund shall be
transferred by the department, beginning September 1, 2009, and
annually thereafter, as follows:
   (1) The first one million dollars ($1,000,000) shall be
transferred to the Medically Underserved Account for Physicians
within the Health Professions Education Fund and shall, upon
appropriation by the Legislature, be used for the purposes of the
Steven M. Thompson Physician Corps Loan Repayment Program, as
specified in Article 5 (commencing with Section 128550) or Chapter 5
of Part 3 of Division 107 and, notwithstanding Section 128555, shall
not be used to provide funding for the Physician Volunteer Program.
   (2) Any amount over the first one million dollars ($1,000,000),
including accrued interest, in the fund shall be transferred to the
Major Risk Medical Insurance Fund created pursuant to Section 12739
of the Insurance Code and shall, upon appropriation by the
Legislature, be used for the Major Risk Medical Insurance Program for
the purposes specified in Section 12739.1 of the Insurance Code.
   (d) Notwithstanding subdivision (b) of Section 1356 and Section
1356.1, the fines and administrative penalties authorized pursuant to
this chapter shall not be used to reduce the assessments imposed on
health care service plans pursuant to Section 1356.
  SEC. 2.  Section 1356 of the Health and Safety Code is amended to
read:
   1356.  (a) Each plan applying for licensure under this chapter
shall reimburse the director for the actual cost of processing the
application, including overhead, up to an amount not to exceed
twenty-five thousand dollars ($25,000). The cost shall be billed not
more frequently than monthly and shall be remitted by the applicant
to the director within 30 days of the date of billing. The director
shall not issue a license to an applicant prior to receiving payment
in full from that applicant for all amounts charged pursuant to this
subdivision.
   (b) (1) In addition to other fees and reimbursements required to
be paid under this chapter, each licensed plan shall pay to the
director an amount as estimated by the director for the ensuing
fiscal year, as a reimbursement of its share of all costs and
expenses, including, but not limited to, costs and expenses
associated with routine financial examinations, grievances, and
complaints including maintaining a toll-free telephone number for
consumer grievances and complaints, investigation and enforcement,
medical surveys and reports, and overhead reasonably incurred in the
administration of this chapter and not otherwise recovered by the
director under this chapter or from the Managed Care Fund. The amount
may be paid in two equal installments. The first installment shall
be paid on or before August 1 of each year, and the second
installment shall be paid on or before December 15 of each year.
   (2) The amount paid by each plan shall be ten thousand dollars
($10,000) plus an amount up to, but not exceeding, an amount computed
in accordance with paragraph (3).
   (3) (A) In addition to the amount specified in paragraph (2), all
plans, except specialized plans, shall pay 65 percent of the total
amount of the department's costs and expenses for the ensuing fiscal
year as estimated by the director. The amount per plan shall be
calculated on a per enrollee basis as specified in paragraph (4).
   (B) In addition to the amount specified in paragraph (2), all
specialized plans shall pay 35 percent of the total amount of the
department's costs and expenses for the ensuing fiscal year as
estimated by the director. The amount per plan shall be calculated on
a per enrollee basis as specified in paragraph (4).
   (4) The amount paid by each plan shall be for each enrollee
enrolled in its plan in this state as of the preceding March 31, and
shall be fixed by the director by notice to all licensed plans on or
before June 15 of each year. A plan that is unable to report the
number of enrollees enrolled in the plan because it does not collect
that data, shall provide the director with an estimate of the number
of enrollees enrolled in the plan and the method used for determining
the estimate. The director may, upon giving written notice to the
plan, revise the estimate if the director determines that the method
used for determining the estimate was not reasonable.
   (5) In determining the amount assessed, the director shall
consider all appropriations from the Managed Care Fund for the
support of this chapter and all reimbursements provided for in this
chapter.
   (c) Each licensed plan shall also pay two thousand dollars
($2,000), plus an amount up to, but not exceeding, forty-eight
hundredths of one cent ($0.0048), for each enrollee for the purpose
of reimbursing its share of all costs and expenses, including
overhead, reasonably anticipated to be incurred by the department in
administering Sections 1394.7 and 1394.8 during the current fiscal
year. The amount charged shall be remitted within 30 days of the date
of billing.
   (d) In no case shall the reimbursement, payment, or other fee
authorized by this section exceed the cost, including overhead,
reasonably incurred in the administration of this chapter.
   (e) For the purpose of calculating the assessment under this
section, an enrollee who is enrolled in one plan and who receives
health care services under arrangements made by another plan or
plans, whether pursuant to a contract, agreement, or otherwise, shall
be considered to be enrolled in each of the plans.
   (f) On and after January 1, 2009, no refunds or reductions of the
amounts assessed shall be allowed if any miscalculated assessment is
based on a plan's overestimate of enrollment.
  SEC. 3.  Section 1367.01 of the Health and Safety Code is amended
to read:
   1367.01.  (a) A health care service plan and any entity with which
it contracts for services that include utilization review or
utilization management functions, that prospectively,
retrospectively, or concurrently reviews and approves, modifies,
delays, or denies, based in whole or in part on medical necessity,
requests by providers prior to, retrospectively, or concurrent with
the provision of health care services to enrollees, or that delegates
these functions to medical groups or independent practice
associations or to other contracting providers, shall comply with
this section.
   (b) A health care service plan that is subject to this section
shall have written policies and procedures establishing the process
by which the plan prospectively, retrospectively, or concurrently
reviews and approves, modifies, delays, or denies, based in whole or
in part on medical necessity, requests by providers of health care
services for plan enrollees. These policies and procedures shall
ensure that decisions based on the medical necessity of proposed
health care services are consistent with criteria or guidelines that
are supported by clinical principles and processes. These criteria
and guidelines shall be developed pursuant to Section 1363.5. These
policies and procedures, and a description of the process by which
the plan reviews and approves, modifies, delays, or denies requests
by providers prior to, retrospectively, or concurrent with the
provision of health care services to enrollees, shall be filed with
the director for review and approval, and shall be disclosed by the
plan to providers and enrollees upon request, and by the plan to the
public upon request.
   (c) A health care service plan subject to this section, except a
plan that meets the requirements of Section 1351.2, shall employ or
designate a medical director who holds an unrestricted license to
practice medicine in this state issued pursuant to Section 2050 of
the Business and Professions Code or pursuant to the Osteopathic Act,
or, if the plan is a specialized health care service plan, a
clinical director with California licensure in a clinical area
appropriate to the type of care provided by the specialized health
care service plan. The medical director or clinical director shall
ensure that the process by which the plan reviews and approves,
modifies, or denies, based in whole or in part on medical necessity,
requests by providers prior to, retrospectively, or concurrent with
the provision of health care services to enrollees, complies with the
requirements of this section.
   (d) If health plan personnel, or individuals under contract to the
plan to review requests by providers, approve the provider's
request, pursuant to subdivision (b), the decision shall be
communicated to the provider pursuant to subdivision (h).
   (e) No individual, other than a licensed physician or a licensed
health care professional who is competent to evaluate the specific
clinical issues involved in the health care services requested by the
provider, may deny or modify requests for authorization of health
care services for an enrollee for reasons of medical necessity. The
decision of the physician or other health care professional shall be
communicated to the provider and the enrollee pursuant to subdivision
(h).
   (f) The criteria or guidelines used by the health care service
plan to determine whether to approve, modify, or deny requests by
providers prior to, retrospectively, or concurrent with, the
provision of health care services to enrollees shall be consistent
with clinical principles and processes. These criteria and guidelines
shall be developed pursuant to the requirements of Section 1363.5.
   (g) If the health care service plan requests medical information
from providers in order to determine whether to approve, modify, or
deny requests for authorization, the plan shall request only the
information reasonably necessary to make the determination.
   (h) In determining whether to approve, modify, or deny requests by
providers prior to, retrospectively, or concurrent with the
provision of health care services to enrollees, based in whole or in
part on medical necessity, a health care service plan subject to this
section shall meet the following requirements:
   (1) Decisions to approve, modify, or deny, based on medical
necessity, requests by providers prior to, or concurrent with the
provision of health care services to enrollees that do not meet the
requirements for the 72-hour review required by paragraph (2), shall
be made in a timely fashion appropriate for the nature of the
enrollee's condition, not to exceed five business days from the plan'
s receipt of the information reasonably necessary and requested by
the plan to make the determination. In cases where the review is
retrospective, the decision shall be communicated to the individual
who received services, or to the individual's designee, within 30
days of the receipt of information that is reasonably necessary to
make this determination, and shall be communicated to the provider in
a manner that is consistent with current law. For purposes of this
section, retrospective reviews shall be for care rendered on or after
January 1, 2000.
   (2) When the enrollee's condition is such that the enrollee faces
an imminent and serious threat to his or her health, including, but
not limited to, the potential loss of life, limb, or other major
bodily function, or the normal timeframe for the decisionmaking
process, as described in paragraph (1), would be detrimental to the
enrollee's life or health or could jeopardize the enrollee's ability
to regain maximum function, decisions to approve, modify, or deny
requests by providers prior to, or concurrent with, the provision of
health care services to enrollees, shall be made in a timely fashion
appropriate for the nature of the enrollee's condition, not to exceed
72 hours after the plan's receipt of the information reasonably
necessary and requested by the plan to make the determination.
Nothing in this section shall be construed to alter the requirements
of subdivision (b) of Section 1371.4. Notwithstanding Section 1371.4,
the requirements of this division shall be applicable to all health
plans and other entities conducting utilization review or utilization
management.
   (3) Decisions to approve, modify, or deny requests by providers
for authorization prior to, or concurrent with, the provision of
health care services to enrollees shall be communicated to the
requesting provider within 24 hours of the decision. Except for
concurrent review decisions pertaining to care that is underway,
which shall be communicated to the enrollee's treating provider
within 24 hours, decisions resulting in denial, delay, or
modification of all or part of the requested health care service
shall be communicated to the enrollee in writing within two business
days of the decision. In the case of concurrent review, care shall
not be discontinued until the enrollee's treating provider has been
notified of the plan's decision and a care plan has been agreed upon
by the treating provider that is appropriate for the medical needs of
that patient.
   (4) Communications regarding decisions to approve requests by
providers prior to, retrospectively, or concurrent with the provision
of health care services to enrollees shall specify the specific
health care service approved. Responses regarding decisions to deny,
delay, or modify health care services requested by providers prior
to, retrospectively, or concurrent with the provision of health care
services to enrollees shall be communicated to the enrollee in
writing, and to providers initially by telephone or facsimile, except
with regard to decisions rendered retrospectively, and then in
writing, and shall include a clear and concise explanation of the
reasons for the plan's decision, a description of the criteria or
guidelines used, and the clinical reasons for the decisions regarding
medical necessity. Any written communication to a physician or other
health care provider of a denial, delay, or modification of a
request shall include the name and telephone number of the health
care professional responsible for the denial, delay, or modification.
The telephone number provided shall be a direct number or an
extension, to allow the physician or health care provider easily to
contact the professional responsible for the denial, delay, or
modification. Responses shall also include information as to how the
enrollee may file a grievance with the plan pursuant to Section 1368,
and in the case of Medi-Cal enrollees, shall explain how to request
an administrative hearing and aid paid pending under Sections 51014.1
and 51014.2 of Title 22 of the California Code of Regulations.
   (5) If the health care service plan cannot make a decision to
approve, modify, or deny the request for authorization within the
timeframes specified in paragraph (1) or (2) because the plan is not
in receipt of all of the information reasonably necessary and
requested, or because the plan requires consultation by an expert
reviewer, or because the plan has asked that an additional
examination or test be performed upon the enrollee, provided the
examination or test is reasonable and consistent with good medical
practice, the plan shall, immediately upon the expiration of the
timeframe specified in paragraph (1) or (2) or as soon as the plan
becomes aware that it will not meet the timeframe, whichever occurs
first, notify the provider and the enrollee, in writing, that the
plan cannot make a decision to approve, modify, or deny the request
for authorization within the required timeframe, and specify the
information requested but not received, or the expert reviewer to be
consulted, or the additional examinations or tests required. The plan
shall also notify the provider and enrollee of the anticipated date
on which a decision may be rendered. Upon receipt of all information
reasonably necessary and requested by the plan, the plan shall
approve, modify, or deny the request for authorization within the
timeframes specified in paragraph (1) or (2), whichever applies.
   (6) If the director determines that a health care service plan has
failed to meet any of the timeframes in this section, or has failed
to meet any other requirement of this section, the director may
assess, by order, administrative penalties for each failure. A
proceeding for the issuance of an order assessing administrative
penalties shall be subject to appropriate notice to, and an
opportunity for a hearing with regard to, the person affected, in
accordance with subdivision (a) of Section 1397. The administrative
penalties shall not be deemed an exclusive remedy for the director.
These penalties shall be paid to the Managed Care Administrative
Fines and Penalties Fund and shall be used for the purposes specified
in Section 1341.45.
   (i) A health care service plan subject to this section shall
maintain telephone access for providers to request authorization for
health care services.
   (j) A health care service plan subject to this section that
reviews requests by providers prior to, retrospectively, or
concurrent with, the provision of health care services to enrollees
shall establish, as part of the quality assurance program required by
Section 1370, a process by which the plan's compliance with this
section is assessed and evaluated. The process shall include
provisions for evaluation of complaints, assessment of trends,
implementation of actions to correct identified problems, mechanisms
to communicate actions and results to the appropriate health plan
employees and contracting providers, and provisions for evaluation of
any corrective action plan and measurements of performance.
   (k) The director shall review a health care service plan's
compliance with this section as part of its periodic onsite medical
survey of each plan undertaken pursuant to Section 1380, and shall
include a discussion of compliance with this section as part of its
report issued pursuant to that section.
   (l) This section shall not apply to decisions made for the care or
treatment of the sick who depend upon prayer or spiritual means for
healing in the practice of religion as set forth in subdivision (a)
of Section 1270.
   (m) Nothing in this section shall cause a health care service plan
to be defined as a health care provider for purposes of any
provision of law, including, but not limited to, Section 6146 of the
Business and Professions Code, Sections 3333.1 and 3333.2 of the
Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the
Code of Civil Procedure.
  SEC. 4.  Section 1367.03 of the Health and Safety Code is amended
to read:
   1367.03.  (a) Not later than January 1, 2004, the department shall
develop and adopt regulations to ensure that enrollees have access
to needed health care services in a timely manner. In developing
these regulations, the department shall develop indicators of
timeliness of access to care and, in so doing, shall consider the
following as indicators of timeliness of access to care:
   (1) Waiting times for appointments with physicians, including
primary care and specialty physicians.
   (2) Timeliness of care in an episode of illness, including the
timeliness of referrals and obtaining other services, if needed.
   (3) Waiting time to speak to a physician, registered nurse, or
other qualified health professional acting within his or her scope of
practice who is trained to screen or triage an enrollee who may need
care.
   (b) In developing these standards for timeliness of access, the
department shall consider the following:
   (1) Clinical appropriateness.
   (2) The nature of the specialty.
   (3) The urgency of care.
   (4) The requirements of other provisions of law, including Section
1367.01 governing utilization review, that may affect timeliness of
access.
   (c) The department may adopt standards other than the time elapsed
between the time an enrollee seeks health care and obtains care. If
the department chooses a standard other than the time elapsed between
the time an enrollee first seeks health care and obtains it, the
department shall demonstrate why that standard is more appropriate.
In developing these standards, the department shall consider the
nature of the plan network.
   (d) The department shall review and adopt standards, as needed,
concerning the availability of primary care physicians, specialty
physicians, hospital care, and other health care, so that consumers
have timely access to care. In so doing, the department shall
consider the nature of physician practices, including individual and
group practices as well as the nature of the plan network. The
department shall also consider various circumstances affecting the
delivery of care, including urgent care, care provided on the same
day, and requests for specific providers. If the department finds
that health care service plans and health care providers have
difficulty meeting these standards, the department may make
recommendations to the Assembly Committee on Health and the Senate
Committee on Insurance of the Legislature pursuant to subdivision
(i).
   (e) In developing standards under subdivision (a), the department
shall consider requirements under federal law, requirements under
other state programs, standards adopted by other states, nationally
recognized accrediting organizations, and professional associations.
The department shall further consider the needs of rural areas,
specifically those in which health facilities are more than 30 miles
apart and any requirements imposed by the State Department of Health
Care Services on health care service plans that contract with the
State Department of Health Care Services to provide Medi-Cal managed
care.
   (f) (1) Contracts between health care service plans and health
care providers shall assure compliance with the standards developed
under this section. These contracts shall require reporting by health
care providers to health care service plans and by health care
service plans to the department to ensure compliance with the
standards.
   (2) Health care service plans shall report annually to the
department on compliance with the standards in a manner specified by
the department. The reported information shall allow consumers to
compare the performance of plans and their contracting providers in
complying with the standards, as well as changes in the compliance of
plans with these standards.
   (g) (1) When evaluating compliance with the standards, the
department shall focus more upon patterns of noncompliance rather
than isolated episodes of noncompliance.
   (2) The director may investigate and take enforcement action
against plans regarding noncompliance with the requirements of this
section. Where substantial harm to an enrollee has occurred as a
result of plan noncompliance, the director may, by order, assess
administrative penalties subject to appropriate notice of, and the
opportunity for, a hearing in accordance with Section 1397. The plan
may provide to the director, and the director may consider,
information regarding the plan's overall compliance with the
requirements of this section. The administrative penalties shall not
be deemed an exclusive remedy available to the director. These
penalties shall be paid to the Managed Care Administrative Fines and
Penalties Fund and shall be used for the purposes specified in
Section 1341.45. The director shall periodically evaluate grievances
to determine if any audit, investigative, or enforcement actions
should be undertaken by the department.
   (3) The director may, after appropriate notice and opportunity for
hearing in accordance with Section 1397, by order, assess
administrative penalties if the director determines that a health
care service plan has knowingly committed, or has performed with a
frequency that indicates a general business practice, either of the
following:
   (A) Repeated failure to act promptly and reasonably to assure
timely access to care consistent with this chapter.
   (B) Repeated failure to act promptly and reasonably to require
contracting providers to assure timely access that the plan is
required to perform under this chapter and that have been delegated
by the plan to the contracting provider when the obligation of the
plan to the enrollee or subscriber is reasonably clear.
   (C) The administrative penalties available to the director
pursuant to this section are not exclusive, and may be sought and
employed in any combination with civil, criminal, and other
administrative remedies deemed warranted by the director to enforce
this chapter.
   (4) The administrative penalties shall be paid to the Managed Care
Administrative Fines and Penalties Fund and shall be used for the
purposes specified in Section 1341.45.
   (h) The department shall work with the patient advocate to assure
that the quality of care report card incorporates information
provided pursuant to subdivision (f) regarding the degree to which
health care service plans and health care providers comply with the
requirements for timely access to care.
   (i) The department shall report to the Assembly Committee on
Health and the Senate Committee on Insurance of the Legislature on
March 1, 2003, and on March 1, 2004, regarding the progress toward
the implementation of this section.
   (j) Every three years, the department shall review information
regarding compliance with the standards developed under this section
and shall make recommendations for changes that further protect
enrollees.
  SEC. 5.  Section 1368 of the Health and Safety Code is amended to
read:
   1368.  (a) Every plan shall do all of the following:
   (1) Establish and maintain a grievance system approved by the
department under which enrollees may submit their grievances to the
plan. Each system shall provide reasonable procedures in accordance
with department regulations that shall ensure adequate consideration
of enrollee grievances and rectification when appropriate.
   (2) Inform its subscribers and enrollees upon enrollment in the
plan and annually thereafter of the procedure for processing and
resolving grievances. The information shall include the location and
telephone number where grievances may be submitted.
   (3) Provide forms for grievances to be given to subscribers and
enrollees who wish to register written grievances. The forms used by
plans licensed pursuant to Section 1353 shall be approved by the
director in advance as to format.
      (4) (A) Provide for a written acknowledgment within five
calendar days of the receipt of a grievance, except as noted in
subparagraph (B). The acknowledgment shall advise the complainant of
the following:
   (i) That the grievance has been received.
   (ii) The date of receipt.
   (iii) The name of the plan representative and the telephone number
and address of the plan representative who may be contacted about
the grievance.
   (B) Grievances received by telephone, by facsimile, by e-mail, or
online through the plan's Internet Web site pursuant to Section
1368.015, that are not coverage disputes, disputed health care
services involving medical necessity, or experimental or
investigational treatment and that are resolved by the next business
day following receipt are exempt from the requirements of
subparagraph (A) and paragraph (5). The plan shall maintain a log of
all these grievances. The log shall be periodically reviewed by the
plan and shall include the following information for each complaint:
   (i) The date of the call.
   (ii) The name of the complainant.
   (iii) The complainant's member identification number.
   (iv) The nature of the grievance.
   (v) The nature of the resolution.
   (vi) The name of the plan representative who took the call and
resolved the grievance.
   (5) Provide subscribers and enrollees with written responses to
grievances, with a clear and concise explanation of the reasons for
the plan's response. For grievances involving the delay, denial, or
modification of health care services, the plan response shall
describe the criteria used and the clinical reasons for its decision,
including all criteria and clinical reasons related to medical
necessity. If a plan, or one of its contracting providers, issues a
decision delaying, denying, or modifying health care services based
in whole or in part on a finding that the proposed health care
services are not a covered benefit under the contract that applies to
the enrollee, the decision shall clearly specify the provisions in
the contract that exclude that coverage.
   (6) Keep in its files all copies of grievances, and the responses
thereto, for a period of five years.
   (b) (1) (A) After either completing the grievance process
described in subdivision (a), or participating in the process for at
least 30 days, a subscriber or enrollee may submit the grievance to
the department for review. In any case determined by the department
to be a case involving an imminent and serious threat to the health
of the patient, including, but not limited to, severe pain, the
potential loss of life, limb, or major bodily function, or in any
other case where the department determines that an earlier review is
warranted, a subscriber or enrollee shall not be required to complete
the grievance process or to participate in the process for at least
30 days before submitting a grievance to the department for review.
   (B) A grievance may be submitted to the department for review and
resolution prior to any arbitration.
   (C) Notwithstanding subparagraphs (A) and (B), the department may
refer any grievance that does not pertain to compliance with this
chapter to the State Department of Health Services, the California
Department of Aging, the federal Health Care Financing
Administration, or any other appropriate governmental entity for
investigation and resolution.
   (2) If the subscriber or enrollee is a minor, or is incompetent or
incapacitated, the parent, guardian, conservator, relative, or other
designee of the subscriber or enrollee, as appropriate, may submit
the grievance to the department as the agent of the subscriber or
enrollee. Further, a provider may join with, or otherwise assist, a
subscriber or enrollee, or the agent, to submit the grievance to the
department. In addition, following submission of the grievance to the
department, the subscriber or enrollee, or the agent, may authorize
the provider to assist, including advocating on behalf of the
subscriber or enrollee. For purposes of this section, a "relative"
includes the parent, stepparent, spouse, adult son or daughter,
grandparent, brother, sister, uncle, or aunt of the subscriber or
enrollee.
   (3) The department shall review the written documents submitted
with the subscriber's or the enrollee's request for review, or
submitted by the agent on behalf of the subscriber or enrollee. The
department may ask for additional information, and may hold an
informal meeting with the involved parties, including providers who
have joined in submitting the grievance or who are otherwise
assisting or advocating on behalf of the subscriber or enrollee. If
after reviewing the record, the department concludes that the
grievance, in whole or in part, is eligible for review under the
independent medical review system established pursuant to Article
5.55 (commencing with Section 1374.30), the department shall
immediately notify the subscriber or enrollee, or agent, of that
option and shall, if requested orally or in writing, assist the
subscriber or enrollee in participating in the independent medical
review system.
   (4) If after reviewing the record of a grievance, the department
concludes that a health care service eligible for coverage and
payment under a health care service plan contract has been delayed,
denied, or modified by a plan, or by one of its contracting
providers, in whole or in part due to a determination that the
service is not medically necessary, and that determination was not
communicated to the enrollee in writing along with a notice of the
enrollee's potential right to participate in the independent medical
review system, as required by this chapter, the director shall, by
order, assess administrative penalties. A proceeding for the issuance
of an order assessing administrative penalties shall be subject to
appropriate notice of, and the opportunity for, a hearing with regard
to the person affected in accordance with Section 1397. The
administrative penalties shall not be deemed an exclusive remedy
available to the director. These penalties shall be paid to the
Managed Care Administrative Fines and Penalties Fund and shall be
used for the purposes specified in Section 1341.45.
   (5) The department shall send a written notice of the final
disposition of the grievance, and the reasons therefor, to the
subscriber or enrollee, the agent, to any provider that has joined
with or is otherwise assisting the subscriber or enrollee, and to the
plan, within 30 calendar days of receipt of the request for review
unless the director, in his or her discretion, determines that
additional time is reasonably necessary to fully and fairly evaluate
the relevant grievance. In any case not eligible for the independent
medical review system established pursuant to Article 5.55
(commencing with Section 1374.30), the department's written notice
shall include, at a minimum, the following:
   (A) A summary of its findings and the reasons why the department
found the plan to be, or not to be, in compliance with any applicable
laws, regulations, or orders of the director.
   (B) A discussion of the department's contact with any medical
provider, or any other independent expert relied on by the
department, along with a summary of the views and qualifications of
that provider or expert.
   (C) If the enrollee's grievance is sustained in whole or in part,
information about any corrective action taken.
   (6) In any department review of a grievance involving a disputed
health care service, as defined in subdivision (b) of Section
1374.30, that is not eligible for the independent medical review
system established pursuant to Article 5.55 (commencing with Section
1374.30), in which the department finds that the plan has delayed,
denied, or modified health care services that are medically
necessary, based on the specific medical circumstances of the
enrollee, and those services are a covered benefit under the terms
and conditions of the health care service plan contract, the
department's written notice shall do either of the following:
   (A) Order the plan to promptly offer and provide those health care
services to the enrollee.
   (B) Order the plan to promptly reimburse the enrollee for any
reasonable costs associated with urgent care or emergency services,
or other extraordinary and compelling health care services, when the
department finds that the enrollee's decision to secure those
services outside of the plan network was reasonable under the
circumstances.
   The department's order shall be binding on the plan.
   (7) Distribution of the written notice shall not be deemed a
waiver of any exemption or privilege under existing law, including,
but not limited to, Section 6254.5 of the Government Code, for any
information in connection with and including the written notice, nor
shall any person employed or in any way retained by the department be
required to testify as to that information or notice.
   (8) The director shall establish and maintain a system of aging of
grievances that are pending and unresolved for 30 days or more that
shall include a brief explanation of the reasons each grievance is
pending and unresolved for 30 days or more.
   (9) A subscriber or enrollee, or the agent acting on behalf of a
subscriber or enrollee, may also request voluntary mediation with the
plan prior to exercising the right to submit a grievance to the
department. The use of mediation services shall not preclude the
right to submit a grievance to the department upon completion of
mediation. In order to initiate mediation, the subscriber or
enrollee, or the agent acting on behalf of the subscriber or
enrollee, and the plan shall voluntarily agree to mediation. Expenses
for mediation shall be borne equally by both sides. The department
shall have no administrative or enforcement responsibilities in
connection with the voluntary mediation process authorized by this
paragraph.
   (c) The plan's grievance system shall include a system of aging of
grievances that are pending and unresolved for 30 days or more. The
plan shall provide a quarterly report to the director of grievances
pending and unresolved for 30 or more days with separate categories
of grievances for Medicare enrollees and Medi-Cal enrollees. The plan
shall include with the report a brief explanation of the reasons
each grievance is pending and unresolved for 30 days or more. The
plan may include the following statement in the quarterly report that
is made available to the public by the director:

"Under Medicare and Medi-Cal law, Medicare enrollees and Medi-Cal
enrollees each have separate avenues of appeal that are not available
to other enrollees. Therefore, grievances pending and unresolved may
reflect enrollees pursuing their Medicare or Medi-Cal appeal rights."


If requested by a plan, the director shall include this statement in
a written report made available to the public and prepared by the
director that describes or compares grievances that are pending and
unresolved with the plan for 30 days or more. Additionally, the
director shall, if requested by a plan, append to that written report
a brief explanation, provided in writing by the plan, of the reasons
why grievances described in that written report are pending and
unresolved for 30 days or more. The director shall not be required to
include a statement or append a brief explanation to a written
report that the director is required to prepare under this chapter,
including Sections 1380 and 1397.5.
   (d) Subject to subparagraph (C) of paragraph (1) of subdivision
(b), the grievance or resolution procedures authorized by this
section shall be in addition to any other procedures that may be
available to any person, and failure to pursue, exhaust, or engage in
the procedures described in this section shall not preclude the use
of any other remedy provided by law.
   (e) Nothing in this section shall be construed to allow the
submission to the department of any provider grievance under this
section. However, as part of a provider's duty to advocate for
medically appropriate health care for his or her patients pursuant to
Sections 510 and 2056 of the Business and Professions Code, nothing
in this subdivision shall be construed to prohibit a provider from
contacting and informing the department about any concerns he or she
has regarding compliance with or enforcement of this chapter.
  SEC. 6.  Section 1368.04 of the Health and Safety Code is amended
to read:
   1368.04.  (a) The director shall investigate and take enforcement
action against plans regarding grievances reviewed and found by the
department to involve noncompliance with the requirements of this
chapter, including grievances that have been reviewed pursuant to the
independent medical review system established pursuant to Article
5.55 (commencing with Section 1374.30). Where substantial harm to an
enrollee has occurred as a result of plan noncompliance, the director
shall, by order, assess administrative penalties subject to
appropriate notice of, and the opportunity for, a hearing with regard
to the person affected in accordance with Section 1397. The
administrative penalties shall not be deemed an exclusive remedy
available to the director. These penalties shall be paid to the
Managed Care Administrative Fines and Penalties Fund and shall be
used for the purposes specified in Section 1341.45. The director
shall periodically evaluate grievances to determine if any audit,
investigative, or enforcement actions should be undertaken by the
department.
   (b) The director may, after appropriate notice and opportunity for
hearing in accordance with Section 1397, by order, assess
administrative penalties if the director determines that a health
care service plan has knowingly committed, or has performed with a
frequency that indicates a general business practice, either of the
following:
   (1) Repeated failure to act promptly and reasonably to investigate
and resolve grievances in accordance with Section 1368.01.
   (2) Repeated failure to act promptly and reasonably to resolve
grievances when the obligation of the plan to the enrollee or
subscriber is reasonably clear.
   (c) The administrative penalties available to the director
pursuant to this section are not exclusive, and may be sought and
employed in any combination with civil, criminal, and other
administrative remedies deemed warranted by the director to enforce
this chapter.
   (d) The administrative penalties authorized pursuant to this
section shall be paid to the Managed Care Administrative Fines and
Penalties Fund and shall be used for the purposes specified in
Section 1341.45.
  SEC. 7.  Section 1374.9 of the Health and Safety Code is amended to
read:
   1374.9.  For violations of Section 1374.7, the director may, after
appropriate notice and opportunity for hearing, by order, levy
administrative penalties as follows:
   (a) Any health care service plan that violates Section 1374.7, or
that violates any rule or order adopted or issued pursuant to this
section, is liable for administrative penalties of not less than two
thousand five hundred dollars ($2,500) for each first violation, and
of not less than five thousand dollars ($5,000) nor more than ten
thousand dollars ($10,000) for each second violation, and of not less
than fifteen thousand dollars ($15,000) and not more than one
hundred thousand dollars ($100,000) for each subsequent violation.
   (b) The administrative penalties shall be paid to the Managed Care
Administrative Fines and Penalties Fund and shall be used for the
purposes specified in Section 1341.45.
   (c) The administrative penalties available to the director
pursuant to this section are not exclusive, and may be sought and
employed in any combination with civil, criminal, and other
administrative remedies deemed advisable by the director to enforce
the provisions of this chapter.
  SEC. 8.  Section 1374.34 of the Health and Safety Code is amended
to read:
   1374.34.  (a) Upon receiving the decision adopted by the director
pursuant to Section 1374.33 that a disputed health care service is
medically necessary, the plan shall promptly implement the decision.
In the case of reimbursement for services already rendered, the plan
shall reimburse the provider or enrollee, whichever applies, within
five working days. In the case of services not yet rendered, the plan
shall authorize the services within five working days of receipt of
the written decision from the director, or sooner if appropriate for
the nature of the enrollee's medical condition, and shall inform the
enrollee and provider of the authorization in accordance with the
requirements of paragraph (3) of subdivision (h) of Section 1367.01.
   (b) A plan shall not engage in any conduct that has the effect of
prolonging the independent review process. The engaging in that
conduct or the failure of the plan to promptly implement the decision
is a violation of this chapter and, in addition to any other fines,
penalties, and other remedies available to the director under this
chapter, the plan shall be subject to an administrative penalty of
not less than five thousand dollars ($5,000) for each day that the
decision is not implemented. The administrative penalties shall be
paid to the Managed Care Administrative Fines and Penalties Fund and
shall be used for the purposes specified in Section 1341.45.
   (c) The director shall require the plan to promptly reimburse the
enrollee for any reasonable costs associated with those services when
the director finds that the disputed health care services were a
covered benefit under the terms and conditions of the health care
service plan contract, and the services are found by the independent
medical review organization to have been medically necessary pursuant
to Section 1374.33, and either the enrollee's decision to secure the
services outside of the plan provider network was reasonable under
the emergency or urgent medical circumstances, or the health care
service plan contract does not require or provide prior authorization
before the health care services are provided to the enrollee.
   (d) In addition to requiring plan compliance regarding
subdivisions (a), (b), and (c) the director shall review individual
cases submitted for independent medical review to determine whether
any enforcement actions, including penalties, may be appropriate. In
particular, where substantial harm, as defined in Section 3428 of the
Civil Code, to an enrollee has already occurred because of the
decision of a plan, or one of its contracting providers, to delay,
deny, or modify covered health care services that an independent
medical review determines to be medically necessary pursuant to
Section 1374.33, the director shall impose penalties.
   (e) Pursuant to Section 1368.04, the director shall perform an
annual audit of independent medical review cases for the dual
purposes of education and the opportunity to determine if any
investigative or enforcement actions should be undertaken by the
department, particularly if a plan repeatedly fails to act promptly
and reasonably to resolve grievances associated with a delay, denial,
or modification of medically necessary health care services when the
obligation of the plan to provide those health care services to
enrollees or subscribers is reasonably clear.
  SEC. 9.  Section 1393.6 of the Health and Safety Code is amended to
read:
   1393.6.  For violations of Article 3.1 (commencing with Section
1357) and Article 3.15 (commencing with Section 1357.50), the
director may, after appropriate notice and opportunity for hearing,
by order levy administrative penalties as follows:
   (a) Any person, solicitor, or solicitor firm, other than a health
care service plan, who willfully violates any provision of this
chapter, or who willfully violates any rule or order adopted or
issued pursuant to this chapter, is liable for administrative
penalties of not less than two hundred fifty dollars ($250) for each
first violation, and of not less than one thousand dollars ($1,000)
and not more than two thousand five hundred dollars ($2,500) for each
subsequent violation.
   (b) Any health care service plan that willfully violates any
provision of this chapter, or that willfully violates any rule or
order adopted or issued pursuant to this chapter, is liable for
administrative penalties of not less than two thousand five hundred
dollars ($2,500) for each first violation, and of not less than five
thousand dollars ($5,000) nor more than ten thousand dollars
($10,000) for each second violation, and of not less than fifteen
thousand dollars ($15,000) and not more than one hundred thousand
dollars ($100,000) for each subsequent violation.
   (c) The administrative penalties shall be paid to the Managed Care
Administrative Fines and Penalties Fund and shall be used for the
purposes specified in Section 1341.45.
   (d) The administrative penalties available to the director
pursuant to this section are not exclusive, and may be sought and
employed in any combination with civil, criminal, and other
administrative remedies deemed advisable by the director to enforce
the provisions of this chapter.
  SEC. 10.  Section 128555 of the Health and Safety Code is amended
to read:
   128555.  (a) The Medically Underserved Account for Physicians is
hereby established within the Health Professions Education Fund. The
primary purpose of this account is to provide funding for the ongoing
operations of the Steven M. Thompson Physician Corps Loan Repayment
Program provided for under this article. This account also may be
used to provide funding for the Physician Volunteer Program provided
for under this article.
   (b) All moneys in the Medically Underserved Account contained
within the Contingent Fund of the Medical Board of California shall
be transferred to the Medically Underserved Account for Physicians on
July 1, 2006.
   (c) Funds in the account shall be used to repay loans as follows
per agreements made with physicians:
   (1) Funds paid out for loan repayment may have a funding match
from foundations or other private sources.
   (2) Loan repayments may not exceed one hundred five thousand
dollars ($105,000) per individual licensed physician.
   (3) Loan repayments may not exceed the amount of the educational
loans incurred by the physician participant.
   (d) Notwithstanding Section 11105 of the Government Code,
effective January 1, 2006, the foundation may seek and receive
matching funds from foundations and private sources to be placed in
the account. "Matching funds" shall not be construed to be limited to
a dollar-for-dollar match of funds.
   (e) Funds placed in the account for purposes of this article,
including funds received pursuant to subdivision (d), are,
notwithstanding Section 13340 of the Government Code, continuously
appropriated for the repayment of loans. This subdivision shall not
apply to funds placed in the account pursuant to Section 1341.45.
   (f) The account shall also be used to pay for the cost of
administering the program and for any other purpose authorized by
this article. The costs for administration of the program may be up
to 5 percent of the total state appropriation for the program and
shall be subject to review and approval annually through the state
budget process. This limitation shall only apply to the state
appropriation for the program.
   (g) The office and the foundation shall manage the account
established by this section prudently in accordance with the other
provisions of law.
  SEC. 11.  Section 12739.05 is added to the Insurance Code, to read:

   12739.05.  Notwithstanding Section 12739, funds placed in the
Major Risk Medical Insurance Fund pursuant to Section 1341.45 of the
Health and Safety Code shall not be continuously appropriated.
  SEC. 12.  On the effective date of this act, the Department of
Managed Health Care shall make the following one-time transfers of
fine and administrative penalty moneys from the Managed Care Fund in
the following amounts:
   (a) One million dollars ($1,000,000) to the Medically Underserved
Account for Physicians within the Health Professions Education Fund
to be used for the purposes of the Steven M. Thompson Physician Corps
Loan Repayment Program, as specified in Article 5 (commencing with
Section 128550) of Chapter 5 of Part 3 of Division 107 of the Health
and Safety Code and, notwithstanding Section 128555 of the Health and
Safety Code, shall not be used to provide funding for the Physician
Volunteer Program.
   (b) Ten million dollars ($10,000,000) to the Major Risk Medical
Insurance Fund created pursuant to Section 12739 of the Insurance
Code to be used for the Major Risk Medical Insurance Program for the
purposes specified in Section 12739.1 of the Insurance Code.
  SEC. 13.  This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:
   In order to make available, at the earliest possible time, funds
to address the state's pressing need for available health care
coverage for individuals who are otherwise uninsurable and to
eliminate the current waiting list for the Major Risk Medical
Insurance Program, to help carry out the powers of the Department of
Managed Health Care to protect and promote the interests of the
public and carry out the intent of the Legislature to promote the
delivery and the quality of health and medical care to the public,
and for the uninsured who may be prompted to enroll sooner in health
care service plans arranging coverage for the Major Risk Medical
Insurance Program, it is necessary that this act take effect
immediately.