Amended in Assembly March 19, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 725

Introduced by Assembly Member Wilk

February 21, 2013

An act to begin delete amend Section 1367.003 end delete begin insert add Chapter 8 (commencing with Section 127670) to Part 2 of Division 107 end insert of the Health and Safety Code, relating to health care begin delete coverage end delete .

LEGISLATIVE COUNSEL’S DIGEST

AB 725, as amended, Wilk. Health care begin delete coverage. end delete begin insert management: health court demonstration program. end insert

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The federal Patient Protection and Affordable Care Act (PPACA) enacts various health care coverage market reforms that take effect January 1, 2014. Among other things, PPACA authorizes the federal Secretary of Health and Human Services to award states with demonstration grants to develop and test alternatives to current tort litigation for resolving disputes over injuries allegedly caused by health care providers and organizations. States interested in receiving a grant are required to develop an alternative to current tort litigation and submit an application to the secretary.

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This bill would require the Secretary of California Health and Human Services to submit an application on behalf of the state to the federal Department of Health and Human Services to receive a grant for state demonstration programs to evaluate alternatives to current medical tort litigation, as authorized by PPACA. The bill would require the secretary to write the application to design a program to create health courts based upon a no-fault process to improve the injury resolution of liability. The bill would specify what items a patient would need to prove under the health court demonstration program.

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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 and makes a willful violation of the act a crime. Existing law prohibits a health care service plan from expending for administrative costs, as defined, an excessive amount of the payments the plan receives for providing health care services to its subscribers and enrollees.

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The federal Patient Protection and Affordable Care Act prohibits a health insurance issuer issuing health insurance coverage from establishing lifetime limits or unreasonable annual limits on the dollar value of benefits for any participant or beneficiary, as specified. The act also requires a health insurance issuer issuing health insurance coverage to comply with minimum medical loss ratios and to provide an annual rebate to each insured if the medical loss ratio of the amount of the revenue expended by the issuer on costs to the total amount of premium revenue is less than a certain percentage, as specified.

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Existing law requires health care service plans and health insurers to comply with the requirements imposed under those federal provisions, as specified. Existing law authorizes the Director of the Department of Managed Health Care and the Insurance Commissioner to promulgate regulations and emergency regulations to implement requirements relating to medical loss ratios, as specified.

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This bill would make technical, nonsubstantive changes to those provisions.

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Vote: majority. Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

end insert

begin insert Chapter 8 (commencing with Section 127670) is
added to Part 2 of Division 107 of the end insert begin insert Health and Safety Code end insert begin insert , to
read: end insert

begin insert

 

Chapter   begin insert 8. end insert Health Court Demonstration Program

 

begin insert 127670. end insert   

The Secretary of California Health and Human
Services shall submit an application on behalf of the state to the
United States Department of Health and Human Services to receive
a grant for the State Demonstration Programs to Evaluate
Alternatives to Current Medical Tort Litigation, as authorized by
Section 10607 of the federal Patient Protection and Affordable
Care Act (PPACA).

begin insert 127672. end insert   

(a) The secretary shall write the application described
in Section 127670 to design a program to create health courts
based upon a no-fault process to improve the resolution of liability
for medical injury.

(b) In accordance with PPACA, the application shall
demonstrate how the proposed alternative does all of the following:

(1) Makes the medical liability system more reliable by
increasing the availability of prompt and fair resolution of disputes.

(2) Encourages the efficient resolution of disputes.

(3) Encourages the disclosure of health care errors.

(4) Enhances patient safety by detecting, analyzing, and helping
to reduce medical errors and adverse events.

(5) Improves access to liability insurance.

(6) Fully informs patients about the differences in the alternative
and current tort litigation.

(7) Provides patients the ability to opt out of or voluntarily
withdraw from participating in the alternative at any time and to
pursue other options, including litigation, outside the alternative.

(8) Does not conflict with state law at the time of the application
in a way that prohibits the adoption of the alternative to current
tort litigation.

(9) Does not limit or curtail a patient’s existing legal rights,
ability to file a claim in or access the legal system, or otherwise
abrogate a patient’s ability to file a medical malpractice claim.

(10) Does not conflict with the Medical Injury Compensation
Reform Act (MICRA), including, but not limited to, Section 6146
of the Business and Professions Code, Sections 3333.1 and 3333.2
of the Civil Code, and Section 667.7 of the Code of Civil
Procedure.

(11) Does not require any party to participate in the program.

begin insert 127674. end insert   

(a) Under the health court demonstration program,
a patient shall be required to prove only the following:

(1) He or she suffered an injury.

(2) The injury was caused by medical care.

(3) The injury meets specified severity criteria.

(b) A patient shall not be required to show a third party acted
in a negligent fashion.

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SECTION 1.  

Section 1367.003 of the Health and Safety Code
is amended to read:

1367.003.  

(a) Every health care service plan that issues, sells,
renews, or offers health care service plan contracts for health care
coverage in this state, including a grandfathered health plan, but
not including specialized health care service plan contracts, shall
provide an annual rebate to each enrollee under such coverage, on
a pro rata basis, if the ratio of the amount of premium revenue
expended by the health care service plan on the costs for
reimbursement for clinical services provided to enrollees under
such coverage and for activities that improve health care quality
to the total amount of premium revenue, excluding federal and
state taxes and licensing or regulatory fees and after accounting
for payments or receipts for risk adjustment, risk corridors, and
reinsurance, is less than the following:

(1) With respect to a health care service plan offering coverage
in the large group market, 85 percent.

(2) With respect to a health care service plan offering coverage
in the small group market or in the individual market, 80 percent.

(b) Every health care service plan that issues, sells, renews, or
offers health care service plan contracts for health care coverage
in this state, including a grandfathered health plan, shall comply
with the following minimum medical loss ratios:

(1) With respect to a health care service plan offering coverage
in the large group market, 85 percent.

(2) With respect to a health care service plan offering coverage
in the small group market or in the individual market, 80 percent.

(c) (1) The total amount of an annual rebate required under this
section shall be calculated in an amount equal to the product of
the following:

(A) The amount by which the percentage described in paragraph
(1) or (2) of subdivision (a) exceeds the ratio described in paragraph
(1) or (2) of subdivision (a).

(B) The total amount of premium revenue, excluding federal
and state taxes and licensing or regulatory fees and after accounting
for payments or receipts for risk adjustment, risk corridors, and
reinsurance.

(2) A health care service plan shall provide any rebate owing
to an enrollee no later than August 1 of the calendar year following
the year for which the ratio described in subdivision (a) was
calculated.

(d) (1) The director may adopt regulations in accordance with
the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code) that are necessary to implement the medical loss ratio as
described under Section 2718 of the federal Public Health Service
Act (42 U.S.C. Sec. 300gg-18), and any federal rules or regulations
issued under that section.

(2) The director may also adopt emergency regulations in
accordance with the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code) when it is necessary to implement the
applicable provisions of this section and to address specific
conflicts between state and federal law that prevent implementation
of federal law and guidance pursuant to Section 2718 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-18). The initial
adoption of the emergency regulations shall be deemed to be an
emergency and necessary for the immediate preservation of the
public peace, health, safety, or general welfare.

(e) The department shall consult with the Department of
Insurance in adopting necessary regulations, and in taking any
other action for the purpose of implementing this section.

(f) This section shall be implemented to the extent required by
federal law and shall comply with, and not exceed, the scope of
Section 2791 of the federal Public Health Service Act (42 U.S.C.
Sec. 300gg-91) and the requirements of Section 2718 of the federal
Public Health Service Act (42 U.S.C. Sec. 300gg-18) and any rules
or regulations issued under those sections.

(g) This section shall not be construed to apply to provisions of
this chapter pertaining to financial statements, assets, liabilities,
and other accounting items to which subdivision (s) of Section
1345 applies.

(h) This section shall not be construed to apply to a health care
service plan contract or insurance policy issued, sold, renewed, or
offered for health care services or coverage provided in the
Medi-Cal program (Chapter 7 (commencing with Section 14000)
of Part 3 of Division 9 of the Welfare and Institutions Code), the
Healthy Families Program (Part 6.2 (commencing with Section
12693) of Division 2 of the Insurance Code), the Access for Infants
and Mothers Program (Part 6.3 (commencing with Section 12695)
of Division 2 of the Insurance Code), the California Major Risk
Medical Insurance Program (Part 6.5 (commencing with Section
12700) of Division 2 of the Insurance Code), or the Federal
Temporary High Risk Insurance Pool (Part 6.6 (commencing with
Section 12739.5) of Division 2 of the Insurance Code), to the extent
consistent with the federal Patient Protection and Affordable Care
Act (Public Law 111-148).

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