BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: AB 578
AUTHOR: Dickinson
AMENDED: May 24, 2013
HEARING DATE: July, 3, 2013
CONSULTANT: Valderrama
SUBJECT : Health care.
SUMMARY : Establishes a public disclosure and hearing process
for an entity applying for licensure as a health care service
plan at the Department of Managed Health Care or an applicant
for a certificate of authority to transact health insurance from
the California Department of Insurance.
Existing law:
1. Establishes the Department of Managed Health Care (DMHC) to
regulate health care service plans (plans) under the
Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene
Act) in the Health and Safety Code and the California
Department of Insurance (CDI) to regulate health insurers
under the Insurance Code.
2. Prohibits any person from engaging in business as plan or a
health insurer unless such person has secured a license with
DMHC or a certificate of authority with CDI.
3. Requires DMHC to issue a license to any person filing an
application under the Knox-Keene Act, if upon due
consideration of the application and of the information
obtained in any investigation, including, if necessary, an
onsite inspection, determines that the applicant has
satisfied the requirements of the Knox-Keene Act, and that a
disciplinary action, as specified, would not be warranted
against the applicant. Otherwise, requires DMHC to deny the
application.
4. Requires, as part of the application for licensure as a plan
or specialized plan, submission of additional items such as:
organizational documents, bylaws, names addresses of
specified individuals such as members of the Board of
Directors, copies of contracts with providers and
administrators, the plan for providing health care services,
subscriber forms and contracts, financial statements, power
Continued---
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of attorney, statement of service areas, grievance
procedures, internal quality review plan, and insurance
documents. Requires inclusion of relevant information
concerning any history of non-compliance with applicable
state or federal laws, regulations, or requirements related
to providing, or arranging to provide for, health care
services or benefits in this state or any other state, or
through the Medicare or Medicaid program, or as a licensed
health professional or an individual or entity contracting
with a plan or insurer in this state or any other state.
5. Requires DMHC, in considering an application for an initial
license, to consider any information provided concerning
whether the plan, its management company, 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
any history of non-compliance, as described, and any other
relevant information concerning misconduct.
6. Permits DMHC to, after appropriate notice and opportunity
for a hearing, by order, suspend or revoke any license or
assess administrative penalties if the licensee has committed
any of the acts or omissions constituting grounds for
disciplinary action.
7. Requires DMHC, upon receiving an application to restructure
or convert a non-profit health plan to a for profit health
plan, to publish a notice in one or more newspapers of
general circulation in the plan's service area describing the
name of the applicant, the nature of the application, and the
date of receipt of the application. Requires the notice to
indicate that DMHC will be soliciting public comments, and
will hold a public hearing on the application. Mandates DMHC
to require the plan to publish a written notice concerning
the application pursuant to conditions imposed by rule or
order. Requires prior to approving any conversion or
restructuring, DMHC to solicit public comments in written
form and to hold at least one public hearing concerning the
plan's proposal to comply with the set-aside and other
conditions required under law.
This bill:
1.Requires the Director of DMHC and the Insurance Commissioner
(regulators) to publish a notice, upon receiving an
application from a first time plan or health insurance
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applicant, in one or more newspapers of general circulation in
the proposed 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 regulator is
soliciting public comments and may hold a public hearing on
the topic. Mandates regulators to require the applicant to
publish a written notice concerning the application pursuant
to conditions.
3.Requires prior to approving the application, regulators to
solicit, review and consider public comments in written form
and to hold at least one public hearing if comments were
received concerning the application.
4.Permits regulators, if they receive comments regarding two or
more pending applications, to hold one consolidated hearing
that considers each application independently.
FISCAL EFFECT : According to Assembly Appropriations committee,
unknown, potentially significant costs to DMHC and/or CDI
depending on the number of new applications received.
PRIOR VOTES :
Assembly Health: 11- 6
Assembly Appropriations:12- 5
Assembly Floor: 54- 23
COMMENTS :
1.Author's statement. The Patient Protection and Affordable
Care Act (ACA), means millions more Californians will obtain
publicly-funded coverage through Medi-Cal, or through Covered
California where tax credits and public subsidies will make
coverage affordable. Medi-Cal expansion, Covered California,
and the ongoing shift of Medi-Cal enrollees from
fee-for-service into managed care and other insurance
products, creates a marketplace for managed care plans and
indemnity insurers that is significantly growing and
attractive. The number of applications for licensure will
likely grow in concert with the population eligible for
subsidy.
Considering that managed care plans and indemnity insurers stand
to gain millions of new enrollees who will be able to afford
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coverage through public subsidy, the public should be afforded
a process by which it can rightfully express concerns or
commentary to DMHC and CDI regarding the licensure applicants
they evaluate. Notwithstanding a growing level of public funds
directed toward health insurers, the licensure process is
nearly closed to the public, raising a need for greater
transparency and public participation.
2.ACA: On March 23, 2010, President Obama signed the ACA
(Public Law 111-148), as amended by the Health Care and
Education Reconciliation Act of 2010 (Public Law 111-152),
into law. Among other provisions, the ACA greatly expands
health insurance coverage in California. Beginning in 2014,
millions of low- and middle-income Californians will gain
access to coverage under the expansion of Medi-Cal, through
easier enrollment requirements established for Medi-Cal, and
through premium and cost-sharing subsidies offered through the
California Health Benefit Exchange, which is now known as
Covered California. The expansion of Medi-Cal requires
coverage of adults under age 65 who are not currently eligible
with incomes up to 138 percent of the Federal Poverty Level
(FPL) or below $15,856 in 2013 for an individual. The Supreme
Court ruling in National Federation of Independent Business v.
Sebelius in June 2012 effectively allowed states to opt-out of
the expansion. Estimates are that between 1.7 and 3 million
Californians could gain access to health care coverage through
the expansion of Medi-Cal.
3.Medi-Cal managed care: According to the California Health
Care Foundation, California began enrolling Medi-Cal
recipients in managed care more than two decades ago. However,
in the 1990s California began to focus on shifting large
numbers of beneficiaries into managed care. The state's
expansion of Medi-Cal managed care was precipitated by many of
the same factors that led to increased managed care
penetration in commercial health care markets: concern about
rapidly increasing health care costs and lack of access to
primary health care services. This shift to managed care
represents a significant change in the financing and delivery
of health care in the Medi-Cal program. Currently as part of
Medi-Cal managed care there are about 5.2 million enrollees in
30 counties, or about 69 percent of the total Medi-Cal
population. There are three models of managed care plans. The
oldest model is the County Operated Health System (COHS).
COHS plans serve about one million enrollees through six
health plans in 14 counties. In the COHS model, the Department
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of Health Care Services (DHCS) contracts with a health plan
created by the County Board of Supervisors and all Medi-Cal
enrollees are in the same health plan. The second model is the
two-Plan model in which there is a "Local Initiative" and a
"commercial plan". DHCS contracts with both plans. The
Two-Plan model serves about 3.6 million beneficiaries. Two
counties employ the Geographic Managed Care model: Sacramento
and San Diego. DHCS contracts with several commercial plans in
those counties and there are about 600,000 enrollees.
4.Coordinated Care Initiative. DHCS is implementing a number of
initiatives that could result in over two million new
enrollees into managed care plans in 2012 and 2013. These
program changes include all age groups and all geographic
regions. SB 1008 (Committee on Budget), Chapter 33, Statutes
of 2012 and SB 1036 (Committee on Budget), Chapter 45, Statues
of 2012 enacted the Coordinated Care Initiative (CCI).
According to DHCS, the CCI is expected to produce greater
value for the Medicare and Medi-Cal programs by improving
health outcomes and containing costs; primarily through
shifting service delivery into the home and community and away
from expensive institutional settings. Better prevention will
keep people healthy.
One major component of the CCI is Cal MediConnect, a voluntary
three-year demonstration program for Medicare and Medi-Cal
dual eligible beneficiaries that will coordinate medical,
behavioral health, long-term institutional, and home-and
community-based services through a single health plan. An
estimated 456,000 dual eligible beneficiaries will be eligible
for enrollment into the Cal MediConnect program in 8 counties
(Alameda, Los Angeles, Orange, San Diego, San Mateo,
Riverside, San Bernardino, Santa Clara), with a maximum of
200,000 in Los Angeles County. An estimated one-third of those
beneficiaries already are enrolled in managed care for
Medi-Cal, Medicare, or both.
For nearly all people with Medi-Cal, the state will require
mandatory enrollment into a Medi-Cal managed care health plan.
This means that almost all people with Medi-Cal in the eight
CCI counties must get all their Medi-Cal benefits, including
long-term services and supports, through a Medi-Cal managed
care health plan. For people with both Medicare and Medi-Cal
eligible for Cal MediConnect, the state will use a passive
enrollment process. Under this process the state will enroll
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eligible individuals into a health plan that combines their
Medicare and Medi-Cal benefits unless the individual actively
chooses not to join and notifies the state of this choice.
5.Number of DMHC applications: Since 2009 there have been 19 new
applicants for licensure at DMHC. According to the DMHC,
there were a total of four applications received in 2009,
three applications in 2010, one application in 2011, eight
applications in 2012, and three applications in 2013. However,
seven of the 19 were applications for Medicare Advantage or
Medicare Part D plans, of which DMHC has limited authority to
regulate. In addition, some applicants apply as specialized
plans for limited services as opposed to a full health care
service plan. Four of the 19 applications were for Medi-Cal.
6.Prior Legislation: SB 445 (Rosenthal), Chapter 792, Statutes
of 1995, required non-profit health plans that want to convert
to for-profit status to provide information to then Department
of Corporations (DOC) (now DMHC) summarizing the charitable
activities undertaken by the plan, as directed by the DOC.
Required set-asides for charitable purposes of the fair value
of the entire corpus of a converting public benefit
corporation plan and required notice and a public hearing
process in a manner substantially similar to this bill.
7.Support. The California Nurses Association, as the sponsor of
the bill, maintain the DMHC licensure process is nearly closed
to the public, raising serious concerns regarding a lack of
transparency. Current law does not provide public notice upon
the submission of a Knox-Keene license application nor do they
hear or solicit public input during the licensure review
process. 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 regarding
Knox-Keene licensure applicants. The Alameda County Board of
Supervisors write that this bill would increase transparency
in the DMHC approval process by requiring public notice of the
application in one or more newspapers in the proposed plan's
service area. The bill also would require at least one public
hearing and the solicitation of written public comments prior
to an application being approved.
8.Opposition. The California Association of Health Plans argues
this bill creates a vague but potentially lengthy and
expensive state licensure process for entities seeking to
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become health plans. It is unclear how any new licensing
requirements will impact existing or new market entrants or
how it will impact Covered California's next solicitation for
QHPs. Lengthening the process does not make sense at this
time. The California Association of Physician Groups state
that the bill is overly cumbersome and creates more
bureaucratic hurdles when there is no convincing evidence that
it would provide additional benefits to consumers. They argue
that this bill would create an unfair, two-tier system of
application review for newly-emerging health plan applicants
versus established health plans who filed over twenty years
ago and would discourage newly-emerging health plans that
would compete at the regional level in the Exchange,
unnecessarily decreasing potential competition.
9.Policy Questions.
a. Should all applications for licensure at DMHC be
subject to the requirements of this bill? As indicated
some entities apply to be licensed as a specialized plan
offering limited services, while others apply as a full
service health plan. Does it make sense to require this
level of analysis for a specialized dental plan or a
Medicare Advantage plan that delivers restricted services
and DMHC has limited authority to regulate?
b. Should the standard for what triggers a public
hearing under the bill be more substantial? This bill
requires regulators at DMHC and CDI to solicit input
about applications submitted requesting licensure and
then requires a public hearing if the regulator receives
just one comment following the solicitation.
SUPPORT AND OPPOSITION :
Support: California Nurses Association (sponsor)
Alameda County Board of Supervisors
Alameda County Supervisor Wilma Chan, Third District
Center for Public Interest Law
Consumer Watchdog
Oppose: California Association of Health Plans
California Association of Physician Groups
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