BILL ANALYSIS �
AB 578
Page 1
ASSEMBLY THIRD READING
AB 578 (Dickinson)
As Amended May 24, 2013
Majority vote
HEALTH 11-6 APPROPRIATIONS 12-5
-----------------------------------------------------------------
|Ayes:|Pan, Ammiano, Atkins, |Ayes:|Gatto, Bocanegra, |
| |Bonilla, Bonta, Chesbro, | |Bradford, |
| |Gomez, Gordon, Nazarian, | |Ian Calderon, Campos, |
| |V. Manuel P�rez, | |Eggman, Gomez, Hall, |
| |Wieckowski | |Ammiano, Pan, Quirk, |
| | | |Weber |
|-----+--------------------------+-----+--------------------------|
|Nays:|Logue, Maienschein, |Nays:|Harkey, Bigelow, |
| |Mansoor, Nestande, | |Donnelly, Linder, Wagner |
| |Wagner, Wilk | | |
| | | | |
-----------------------------------------------------------------
SUMMARY : Establishes a public disclosure and hearing process
for an entity applying for the first time for licensure as a
health care service plan or a specialized health care service
plan at the Department of Managed Health Care (DMHC) and a
certificate of authority to transact health insurance at the
California Department of Insurance (CDI). Specifically, this
bill :
1)Requires the DMHC Director (Director) or the Insurance
Commissioner (IC) to publish a notice, upon receiving an
application, in one or more newspapers of general circulation
in the proposed plan's service area, describing the name of
the applicant, the nature of the application, and the date of
receipt of the application.
2)Requires the notice to indicate that the Director or IC is
soliciting public comments and may hold a public hearing on
the application. Requires the DMHC or CDI to allow comments
to be submitted through its Internet Web site. Requires the
Director to require the plan to publish a written notice
concerning the application pursuant to conditions imposed by
the Director or IC.
3)Requires prior to approving the application, the Director or
AB 578
Page 2
CDI to solicit, review and consider public comments in written
form and to hold at least one public hearing if comments are
received concerning the application. Whenever comments
regarding two or more pending applications are received, the
Director or CDI may hold one consolidated hearing that
considers each application independently.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, likely costs of less than $125,000 between CDI and
DMHC, depending on the number and complexity of new applications
and the public comments generated.
COMMENTS : According to the author, existing law makes no
provisions to conduct any process allowing the public or any
stakeholder group to provide input for consideration when
reviewing an application for health insurance licensure. The
author asserts that it is essential that state law be clear that
the public and others have opportunities to comment on any
license application. The author states that upon full
implementation of the federal Patient Protection and Affordable
Care Act, millions more Californians will obtain health care
coverage. Many of these Californians will obtain publicly
funded coverage through Medi-Cal, or in the private market
through Covered California where tax credits and public
subsidies will make coverage affordable. With the impending
Medi-Cal expansion and operation of Covered California (formerly
the California Health Benefit Exchange), as well as the ongoing
shift of Medi-Cal enrollees away from fee-for-service and into
managed care, the marketplace for managed care plans is
significantly growing making it an opportune time for entities
to apply for Knox-Keene Health Care Service Plan Act of 1975
(Knox-Keene Act) licensure and compete for new managed care
business.
The author believes that since the public will subsidize
coverage for so many in the growing managed care market, the
public has a vested interest in plans who aim to become
Knox-Keene Act licensed plans. Despite this vested interest,
the licensure process is nearly closed to the public, raising
serious concerns regarding a lack of transparency. Current law
does not provide for any public notice upon the submission of a
Knox-Keene Act license application to DMHC, nor are there any
provisions that require DMHC to publicly hear or solicit public
input during the licensure review process. The author also
AB 578
Page 3
raises concerns that the DMHC is authorized to grant
confidentiality to Knox-Keene Act license applicants, denying
the public any opportunity to truly evaluate the methods by
which an applicant will provide health care benefits to its
enrollees. Further, the author states that considering that
managed care plans stand to gain millions of new enrollees who
will be able to afford coverage through public subsidy, the
public should be afforded a process by which it can rightfully
express concerns or commentary to DMHC regarding the Knox-Keene
Act licensure applicants it evaluates.
The California Nurses Association and Alameda County Supervisor
Wilma Chan support this bill. Consumer Watchdog indicates with
the impending federal requirement that all Californians purchase
health coverage, it is more important than ever that the
licensing process ensures a high level of scrutiny of any entity
seeking to sell policies in California. Consumer Watchdog
believes this bill is a straightforward step in the direction of
transparency that will allow Californians to work with the DMHC
to ensure that companies entering the California market are
prepared to meet the requirements of the Knox-Keene Act.
California Watchdog states that it is much better for California
patients and consumers, in general, that the companies providing
health coverage face the light of day before receiving their
license than potentially having to contend with problems
stemming from insufficiently reviewed licensees after damage has
been done. The Center for Public Interest supports this bill
because it will create transparency in the process by which DMHC
evaluates and approves applicants for Knox-Keene licensure.
The California Association of Health Plans and the California
Association of Physician Groups oppose this bill because they
believe it will increase costs and slow down the process for
licensing health insurance in California.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097
FN: 0000816
AB 578
Page 4